Are you an early stage founder trying to unlock your market potential? Check out more insights from the Next47 team, leading sales experts, and founders in our Enterprise Sales Playbook.

Building your first sales team is a major milestone for the founder of any growing company. A strong sales team can help you scale your business, reach new customers, and achieve your revenue goals. But who are the key players at the early stage, and how should you compensate them? 

In this article, we’ll address these common questions to help you build a sales team and comp plan that will be a driving force for success.

Early Stage Team Configuration

Who you consider for a sales hire is entirely stage and founder-dependent. For technical founders, first hires usually consist of full-cycle sales representatives, who are generalists capable of executing outbound pipeline generation, qualifying opportunities, negotiating commercial terms,  closing contracts, and following up on implementation.

These first hires should get involved in discussions ranging from Ideal Customer Profile (ICP) definitions to product roadmaps, working closely with the company’s leadership to ensure the customer’s voice is heard throughout the company. 

Conversely, founders with a sales background might lean towards hiring a sales development representative (SDR) to generate some pipeline volume, while retaining the account executive (AE) responsibilities of driving opportunities down the funnel. 

As the structure matures, the next steps usually include 1) Setting up a full sales and business development representative (XDR) Inside Sales team to handle inbound and outbound lead generation. 2) Building sales capacity with dedicated Account Executives and Sales Engineers to support the technical selling activities. 3) Hiring the initial customer success teams to manage the rest of the customer’s lifecycle, which should coincide with building out the sales team. Each of these roles has intricacies related to goal setting, measurement, and compensation, which will be discussed in the following sections, respectively.

Sales or Business Development Representative

Role Overview: XDRs focus on creating and qualifying sales opportunities for Account Executives to handle. This is performed either through inbound lead qualification or outbound efforts such as cold calling, emailing, and outreach on professional and social platforms.

It is important to note that high turnover can be a challenge with these teams.  These roles tend to have a 12-18 month tenure. To get the most out of this program for both the team member and the company, it is recommended that you have well-documented processes for onboarding, enablement (sales and product), engaged coaching from a team leader daily, and a career progression plan with published milestones for advancement through each phase of the plan. So, before hiring someone, make sure you know what is expected of them and be ready to get them trained quickly. Also, gamifying the goals through the use of contests and dashboards can help increase engagement. 

Compensation Considerations: As with most sales roles, XDR compensation should have a strong variable element. Usually, 30-40% of their total earnings depend on target achievement, with an expected 2-month ramp-up period to full monthly productivity (with guaranteed variable pay in this period). Benchmarks can include:

  • Number of Sales Qualified Leads per Month: This metric depends on the Average Sales Price and your close rates from Discovery Meeting to Closed Won. A general benchmark would be 10-15, but could reach higher numbers depending on the industry.
  • Number of Touches (Calls, Emails, etc.) in a Given Period: Usually a high bar, with 50-100 expected calls and emails per day.
  • Meetings Booked: Usually 15-30 meetings per month, largely depending upon the type of user/buyer your solution is aligned with. Some types of buyers are more open to outreach than others.
  • Deals Closed: Not a direct responsibility of the XDRs, but some companies include extra compensation for won deals originated by them, especially if outbound.

Account Executive

Role Overview: AEs are responsible for taking over qualified leads from the Inside Sales team and steering them to closure. 

This normally involves:

  1. Account and contact research
  2. Running a discovery process to understand the existence of and prioritization of pain alignment for your prospect and the value proposition of your solution
  3. Presenting product demos
  4. Validating solution requirements and budget
  5. Scoping technical validation success criteria
  6. Conducting a proof of value mapping
  7. Building a business case
  8. Dealing with Buying Influences
  9. Negotiating terms and conditions of a sale
  10. Closing

For deep technical solutions where the primary user is a developer, the sales process can run in a different sequence and include product-led growth (PLG) fueled by a pleasant self-service experience via a self-directed product trial and/or open-source use.  Adopting PLG and Sales-Led motions simultaneously is critical to executing a modern GTM motion.

Account Executives are also responsible for maintaining and expanding relationships with accounts. They usually work in partnership with Customer Success representatives. Given these relationships, they tend to be a reliable source of information for the product team, conveying user feedback about the product and uncovering new needs.  

Compensation Considerations: Compensation for AEs varies based on the segment they cater to and the industry they operate in. Some topics to think about include:

  • Commissions Rate: Usually in the range of 5-10% in software companies, these are typically calculated based on the New Annualized Contract Value (New ACV) for the first committed year of the contract term.  
  • Multi-Year Spiff (Sales Performance Incentive Fund): In an attempt to incentivize AEs to close multi-year deals, companies may add percentage points (~2%) to the commission calculation whenever a multi-year contract is signed that includes pre-committed New ACV expansion in the years following the first year.  
  • Payment Frequency: Startups tend to pay commissions monthly.
  • Pay-Mix: Given the significant influence AEs have on the sales process, their compensation often carries a more aggressive pay mix where 50% of the On Target Earnings (OTE) is made up of a variable component, allowing for increased upside through the use of commission accelerators when the AE exceeds the assigned quota.
  • Quota Size: Varies drastically among industries, but a useful rule-of-thumb typically indicates 20-25% on-target earnings with the AE’s quota providing a 4X to 5X quota assignment over OTE.
  • Ramp-Up: AEs usually need around 3 to 6 months to ramp up in their role; however, unlike in the XDR case, this number is influenced by the startup’s sales cycle, the complexity of the solution being sold, and the market segment being targeted.

Sales/Solution Engineer (SEs)

Role Overview: SEs are in charge of assisting the sales team with technical customer interactions, such as in-depth explanations of features and capabilities, product demonstrations, executing proof of value tech validation trials, customization requirements, and collaboration with product development. In some cases, they are involved in providing after-sales support for implementation and maintenance.

Compensation Considerations: SEs are usually utilized by multiple AEs to support their sales efforts. Because of that, their variable pay tends to be attached to team quotas, with a compensation structure that encourages collaboration and shared goals.

Although not a typical sales headcount, it is important to structure SE compensation with a significant variable component, usually around 20-30%. It should take into consideration the quota attainment of the AEs that they support, as well as commissions over successful sales.

Further Considerations About Compensation

After defining target-oriented compensation policies, founders should also consider other levers that are not necessarily role-specific. These goals are designed not only to provide sales teams with good financial incentives but also to encourage appropriate behavior.

Here are some topics to consider:

Equity Compensation: Often in the form of Employee Stock Option Plans (ESOP), Equity Compensation plays a pivotal role in the growth trajectory of emerging startups. At the nascent stages, startups often need more cash reserves, making it challenging to attract top-tier talent solely through competitive salaries. ESOPs bridge this gap by offering employees a stake in the company’s future, aligning their interests with the long-term success of the startup. This is not different when it comes to Sales, so equity should be considered when designing Sales comp plans. 

Payment Cadence: Startups tend to pay sales representatives monthly, usually net 30 days after a contract is signed. The commissions are typically a percentage of the first-year ARR or New ACV, paid at once. 

Lack of a Commission Cap: We see this practice as positive. Some argue that the absence of a commission cap complicates team management due to salary disparity and high sales costs. However, high commissions are indicative of high growth and should be seen as a positive alignment of incentives. If sales reps are making more money than executives, your company is probably on the right track.

Quota Over-Assignments: A common strategy across sales roles, this helps ensure that the team meets predetermined targets. However, over-assigning unattainable quotas can demotivate reps and indicate a deeper issue in product-market fit. 

Finally, Clawbacks: These instruments are usually deployed to reclaim commissions paid to salespeople when a customer unexpectedly ends a contract or requests a refund. They are usually non-negotiable and incorporated into employment contracts. However, in some US states, it is illegal to take back commissions that were declared as earned or that have already been paid.  When using clawbacks it is important to pair the language with the required approval from the appropriate executives (CFO, CRO, COO, or CEO) depending on the stage and executive team. The use of an approval provides checks and balances so there is an opportunity to review what happened and use the learnings to prevent the need for future clawbacks.


At the heart of every successful startup lies a motivated sales team, driven by well-aligned incentives. By taking into account the unique characteristics of each sales role and regional intricacies, founders can ensure that their team is not only motivated but also feels valued and recognized. In the end, it’s the aligned incentives that bridge the gap between individual aspirations and collective success.