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sales-compensation skill

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/skills/sales-compensation

This skill helps you design sales compensation plans that align incentives with business goals and customer outcomes.

npx playbooks add skill refoundai/lenny-skills --skill sales-compensation

Review the files below or copy the command above to add this skill to your agents.

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SKILL.md

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---
name: sales-compensation
description: Help users design sales compensation plans. Use when someone is hiring their first sales rep, restructuring sales comp, trying to align sales incentives with business goals, or dealing with comp plan issues like sandbagging or churn.
---

# Sales Compensation

Help the user design effective sales compensation plans using frameworks from 2 product leaders.

## How to Help

When the user asks for help with sales compensation:

1. **Understand the business model** - Ask about their sales cycle, ACV, and customer retention patterns
2. **Identify current problems** - Determine if there are misaligned incentives or retention issues
3. **Design aligned incentives** - Help them create comp plans that drive the right behaviors
4. **Consider ramp and quotas** - Guide them on structuring pay for new hires

## Core Principles

### The standard 50/50 split is a starting point
Jason M Lemkin: "It's usually 50/50, right? 50% base, 50% bonus for a sales rep." The standard OTE structure is 50% base salary and 50% variable commission. This is a common baseline for quota-carrying roles.

### Traditional comp plans are misaligned
Sahil Mansuri: "Sales comp plans are stuck in the stone ages... What we haven't done is built a modern technical sales compensation plan that actually aligns the needs and incentives of the business, the customer and the rep." Consider designing comp that rewards long-term retention and net dollar retention, not just closed deals.

### Align incentives with customer success
If your business depends on customer retention, comp plans should include components tied to customer outcomes, not just initial bookings. Reps who close churny deals should earn less than those who close sticky customers.

### Ramp periods matter
New sales hires need ramp periods with guaranteed draws or reduced quotas while they learn the product and market. Typical ramps are 3-6 months for SMB and 6-12 months for enterprise.

### Simplicity drives behavior
Complex comp plans with many variables lead to confusion and gaming. Simple plans where reps understand exactly what actions increase their pay are more effective.

## Questions to Help Users

- "What percentage of new deals churn within the first year? Does your comp plan account for this?"
- "Is your comp plan so complex that reps don't know how to maximize their earnings?"
- "What behaviors are you trying to incentivize? Does your comp plan actually reward those behaviors?"
- "How long is your sales cycle, and how does that affect cash flow for reps?"
- "What's your ramp structure for new hires? Is it working?"

## Common Mistakes to Flag

- **Incentivizing only bookings** - Paying for closed deals without considering customer quality or retention
- **Over-complicated plans** - Too many variables that confuse reps and enable gaming
- **No ramp protection** - Expecting new hires to hit full quota immediately
- **Misaligned accelerators** - Bonuses that kick in at the wrong thresholds
- **Ignoring churn** - Comp plans that don't account for customers who don't renew

## Deep Dive

For all 2 insights from 2 guests, see `references/guest-insights.md`

## Related Skills

- sales-qualification
- product-led-sales
- pricing-strategy

Overview

This skill helps you design practical, outcome-driven sales compensation plans that align rep behavior with business goals. It guides you through choosing base/variable splits, incorporating retention metrics, and structuring ramp and quotas for new hires. Use it to prevent common comp problems like sandbagging, churn incentives, and over-complex plans.

How this skill works

I first gather key business inputs: sales cycle length, average contract value (ACV), churn and net dollar retention. Then I surface misalignment risks and propose concrete plan components—base pay, variable commission, accelerators, and retention or outcome-based multipliers. Finally I recommend ramp structures, quota cadence, and simple guardrails to reduce gaming and confusion.

When to use it

Hiring your first sales rep and setting initial OTE and quotas
Restructuring compensation to better align incentives with retention or expansion
Fixing issues like sandbagging, high churn, or unclear rep behavior
Designing ramp periods for new hires across SMB or enterprise roles
Evaluating whether accelerators and thresholds motivate desired outcomes

Best practices

Start with the 50/50 base-to-variable OTE as a baseline and adjust for role and market
Tie meaningful portions of variable pay to customer outcomes (renewal, NDR) if retention matters
Keep plans simple: few components, clear math, and transparent payouts
Provide ramp protection (draws or reduced quotas) for 3–6 months (SMB) or 6–12 months (enterprise)
Avoid accelerators that reward early sandbagging; set thresholds that reflect sustainable growth

Example use cases

Designing an OTE and quota for a first AE at an early-stage SaaS startup
Reworking comp to reduce churn by tying a portion of commission to 12-month retention
Fixing a plan where reps book low-quality deals to hit immediate targets
Creating a ramp schedule with guaranteed draw for new hires in a long sales cycle
Adding a simple expansion commission to encourage account growth without distorting bookings

FAQ

How much of pay should be variable?

Use 50% variable as a starting point for quota-carrying roles, then adjust by role seniority, deal complexity, and market benchmarks.

How do I prevent reps from selling churny deals?

Include retention or NDR-based components, clawbacks on early churn, or deferred payouts tied to renewals to align incentives with long-term customer health.