Hopefully, sometime over the next few weeks, you’ll finish up your model and planning for next year.  If not, please try to do it before 12/31 … 🙂

I’m working on this with several companies I am involved with.


My #1 suggestion is this — try to have every single employee that can materially influence revenue have a variable revenue component.

I know we all agree everyone in sales has to have commissions and a highly variable comp structure.  More on why here.  But — I mean everyone that materially impacts the plan should have some variable comp, at least in the early and middle days.  And maybe even forever.

By that I mean:

  • Your VP Product should be incented to build the right features not only to Make a Great Product — but also hit the plan.  How about a 15% variable cash component?  A 15% bonus for exceeding the plan — and also perhaps some downside for missing it.
  • Your VP Marketing sure better have her comp plan tied to the leads or opportunity commits that make the plan work.  How about a 20% variable cash component?  The leads aren’t there, she comes up short.  But if the plan is blown out, she shares in the extra revenue.
  • Your VP Customer Success sure better have her comp plan tied to hitting the upsell, retention, or negative net churn goals.  How about a 30%+ variable component?  Watch her or him sweat the lost customers 10x more when money is on the line.
  • Your VP and Directors of Engineering need to build the stuff we need to hit the plan.  How about a 10-15-20% variable comp plan here?
  • Your Controller exceeds the collections goals, and you end up with an extra $300k of cash in the bank?  How about a bonus there?

“Nah, my Director of Engineering doesn’t need variable comp,” you say.  We’re all in it together.  She’s got plenty of equity.


But if nothing else, even for non-sales professionals, revenue is a clear team goal everyone can and should get behind.  And paying for performance is just something all of us sort of viscerally understand, even if we’ve never carried a bag.  We hit the ’22 plan together, you get a pat on the back, your equity is worth more, That’s Great.  But if you get another $20k — just watch how people change.  Maybe it doesn’t change the life of your senior hires.  But if the reward is $0 but appreciation in existing stock grants, you just won’t get the same alignment to your ’22 revenue plan.  People respond to short-term incentives, especially the #1 incentive.  Even if it doesn’t always totally make sense.

Later, this may get harder.  Later, you may need subordinate goals.  With a huge team, this can often get complicated, too.  But for now, I’d suggest tying a bonus plan for next year to exceeding the revenue plan for all your key hires, of every discipline.

Let me share two anecdotes.

Recently, I went through this exercise with an amazing company I work closely with.  We added a variable component to the VP of Engineering’s comp plan.  If we missed the annual plan, his salary dropped by 10%.  If we hit it exactly, he got a 5% bonus beyond base.  And if we exceeded it by 10%, he got a 20% bonus.

About 15 minutes after that, he came back.  And completely changed the product roadmap for next year.

Now, you might argue that’s a mistake.  Too much focus on the short-term over the long-term.  Maybe.  But … at least it creates alignment, a debate, a discussion.  A new sense of shared focus on really, truly, hitting the next year plan.

I had a similar experience myself, personally.  Back during our Year of Hell, I waived all my salary.  I worked for no cash (though I took equity instead) for about a year after we raised venture capital.

And then, in the depths of the Lehman Brothers the-world-is-over-Sequoia-Says-Good-Times-R.I.P. days, I did something I was pretty proud of.  I got up off the Mac and got 2 customers to prepay an extra $600,000 in cash upfront.  When there was no contractual reason for them to do so.  At a time the world was ending.  Considering our net burn rate was low, this bought us another 9 months of runway.

So I asked for a $10k bonus.  My salary was $0.  But I needed the bonus.  I brought in the money.  I needed a tangible, real pat on the back.  In the way only a check can do.

It was a confusing discussion with the investors.  You need a $10k bonus, but you’re waiving your $120k salary?  Huh?  But I needed it.  To connect my efforts to hit the plan, the $600k extra I brought in when the world was ending … with the plan itself.

So does the rest of your team.  They need it too.

Not just the sales folks.


Note: an updated SaaStr Classic post

awesome bonus chart from here

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