Dear SaaStr: How Do I Structure a Comp Package for Our First VP of Sales? He’ll have 7 folks under him,
For a small SaaS company with a Head of Sales managing 7 FTEs, I’d recommend a compensation structure that aligns with both early-stage SaaS norms and your growth goals.
Here’s how I’d approach it:
1. Base Salary + Variable Compensation (50/50 Split). With a +25% Uncapped Bonus For Exceeding Plan.
A typical structure for a Head of Sales is 50% base salary and 50% variable compensation tied to performance. For example, if the On-Target Earnings (OTE) is $250k, $125k would be base salary, and $125k would be performance-based based on hitting the plan for the year. This ensures they’re incentivized to hit targets while still having a stable income.
I love to see a bonus that isn’t capped for exceeding the plan for the year, so they can hit at least 125% of their OTE for crushing the plan. And potentially more.
More here:
2. Variable Compensation Tied to Either Team Quota or Year-End ARR
The variable portion should be tied to the team’s overall performance. If the team has a quota of, say, $5M ARR, the Head of Sales should earn their full variable comp if the team hits that number. You can also add accelerators for exceeding quota (e.g., 10% bonus for every dollar above quota).
3. Equity
At the early stage, equity is a key part of the package. A Head of Sales at this level might receive 0.5%-1.5% equity, depending on their experience and the risk they’re taking by joining your company. Equity helps align their long-term incentives with the company’s success.
- 0.75%-1% for a Stretch “Head of Sales”
- 1% as a baseline
- 1.5% – 2.5% for later stage CROs
4. Ramp Period
Give them a reasonable ramp period to hit their stride—typically 4-6 months. During this time, they often receive a guaranteed portion of at least some of their variable comp to ensure they’re not penalized while building the pipeline.
But — expect them to put some points on the board quickly. The best always do.
5. Market Adjustments
If you’re in a Tier 1 city like SF or NYC, you might need to pay 10%-20% more to stay competitive. If you’re remote or in a lower-cost area, you can potentially adjust accordingly.
