This post originally appeared on the SalesCrunch blog.
A friend of mine, the Founder & CEO of a fast-growing online media company, is getting ready to hire his first VP, Sales. He emailed me asking about compensation ranges. For context, his company’s platform accesses millons of highly engaged consumers and it sells targeted advertising to brands and the advertising agencies that represent them. Here is the question he asked:
“Quick question regarding sales compensation. I am looking to hire a VP of Sales, and have a couple really solid candidates coming who I am likely going to make one offer to. Both have asked about compensation for the role, and both are pretty heavy hitters (with 15+ years experience).
One worked in top positions dating back to Lycos… the other is the current EVP of Sales for (a six-year old, 100+ person media company in NYC) who started when they were a few guys. Trying to get a sense of a compensation package (salary, % sales/bonus, equity) for both that they won’t balk and at the same time we aren’t shooting the moon on either.”
I asked a few key questions to better understand and assess the situation:
Q: Are you hiring this person to build a team, sell or both? If build a team, how big and how fast?
A: Person would likely start by helping us continue to refine/pitch, the packaging of the story to brands/agencies. We’ve already got a couple people who would report into them (who are already making inroads with agencies). For team, would think adding a couple more people over next few months is about right. This would give them 4 people under management, which hopefully would get our foundation pretty solid as we then really look to scale out.
Q: How far along is the product you are selling? Have you sold a bunch already and proved it works and just need to scale or are you still in customer development?
A: In terms of existing traction, we’re in some good conversations and already have some very early cash coming in around advertising (~$50k/mo). Have only started a couple months ago though, so idea is to bring in someone who can take the helm on sales and push ball even faster, while helping us optimize existing guys on team selling, as well as get us thinking about other resources we may need.
Q: Are they going to manage ad operations as well or is that going to live under someone else?
A: Yes, our current ad ops person would be reporting into them.
- Base salary + commission override on the team – basically, they get a smaller percentage on every deal their team closes.
- Base + bonus.
Whatever you do, you don’t want the VP, Sales to own any accounts. If they own accounts, the sales team will see their manager as competition who gets to cherry pick the best accounts instead of a coach or a resource to help close deals. At the early stage of the company, you want a player/coach who is selling side-by-side with each rep. I don’t like option #1 at an early stage because it forces the VP to focus too much on short-term revenue at the cost of the long-term product, customer and team development. I like #2 with the bonus based on no more than 3 key performance indicators (KPIs), as its impossible to focus on more than 3 in any given quarter. Also, I suggest bonus be paid quarterly so the VP is motivated by the KPIs and so those KPIs can be changed quarterly with company priorities. The 3 KPIs early on might revolve around 1. Revenue 2. Recruiting 3. Ramping existing reps. You can modify these as time goes on to focus on new priorities. For example, the revenue KPI might be more specifically targeted to new accounts if the priority is to broaden the base of customers. If your VP is managing sales operations, as is the case above, then one of the KPIs could target customer satisfaction to make sure ops is filling orders and managing customer well on the backend.
By the way, none of this addresses the type of person you want in an early stage company as your VP, Sales. Despite conventional wisdom, you do NOT want a veteren sales executive from a large company in your space. You want an evangelist that knows how to deal with uncertainty, a complete lack of structure and can manage the customer development process. I go into more detail about this in my post “Startup sales: The Missionary Position” and in my interview with Steven Blank “Tips for Hiring your First VP, Sales at a Startup“.