What do you think about designing compensation plans/OTE for a customer success team for an early stage startup ($1M-$2M ARR)?

In early days, you basically have 2 decisions to make on comp plans for Customer Success:

First, do you want:

  • a variable component (often 85/15 or 80/20 or so), or
  • no variable compensation.

And then, second, is the core goal:

  • account expansion; or
  • account retention / churn reduction.

The “problem” with variable compensation is the team will only do what incents them to do what it takes to earn it. So if you incent expansion, there will be very little attention on accounts that are maxxed out in terms of dollars. Even if they are your top-tier logos and accounts.

And that also means it’s even more important to pick which is first — retention or expansion. And then mainly align variable comp around that.

I used to think the best combo was variable comp + a focus on churn reduction (not account expansion), and I think I still do. Pay the CS managers say 85% of their OTE in salary, and 15% for hitting churn reduction goals. Another way to do is to compensate CS on overall ARR growth for their accounts. This is an elegant way to combine expansion + retention goals.

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Published on October 5, 2018

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