Hey, I'm Dan! I invest in startups at Madrona and write the DL, a weekly newsletter about tech in the Pacific Northwest

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Simple Software Sales Math

David Sacks shared a great thread on the simple math behind setting up an enterprise software sales team last week. Here are the key takeaways:

  • The standard commission for SaaS sales is 10%
  • There is typically a 50/50 split between base and variable compensation for account executives (AEs)
  • (This gives you the chart above for a typical AE pay scale)
  • Quota Capacity (QC) is the total team quota, and the average sales team attains ~70% of quota capacity
  • A manager’s quota should be set at 80% of QC, and if the team is hitting 80%+ of QC, that’s a sign to hire more AEs


Some conclusions based on this math:

  • Because the fully-loaded cost of an AE is ~25% the cost of sales, and overhead is ~25% of sales, companies can spend ~50% of New ARR on CAC and keep payback under 12 months
  • It’s hard to build an enterprise sales motion if AEs can’t sell more than $400K of new ARR per year (which would imply $80-100K OTE)


There are more details in his full blog post here. Definitely an article worth saving as a reference!


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