Early comp plans are less about “perfect math” and more about creating the right behavior. Your first plan should align incentives with the motion you’re building (founder-led, PLG, inbound, outbound), protect cash, and still feel fair enough that talented reps want to stay and perform.

If you’re a startup setting up comp for the first time, here are the principles and decisions that matter most.

1) Start with the business goal, not the spreadsheet

A comp plan should be a lever for execution. Before choosing commission rates or accelerators, get clear on what you’re optimizing for in the next 2–3 quarters.

Common early-stage goals include:

• Landing early reference customers
• Driving pipeline creation (outbound)
• Converting inbound demand efficiently
• Growing ARR with expansions
• Improving cash flow via collections or faster payment

If your leadership team can’t clearly articulate the goal, comp will become a negotiation tool instead of a growth tool.

Comp design rule: pay for outcomes you want repeated.

2) Pick a motion: hunters, farmers, or full-cycle

The most common early startup mistake is asking a rep to do “everything” while paying them like they do one thing.

There are three basic approaches:

• Hunters: focused on new business, outbound, pipeline generation, first deals
• Farmers/AMs: focused on renewals, expansions, retention, multi-product
• Full-cycle AEs: run discovery → close → expansion (common early on)

Your motion should match the complexity of your sale:

• If onboarding, security, procurement, or multi-stakeholder selling is heavy, full-cycle reps make sense.
• If you have strong inbound and a simple close, you may win with lean reps + strong enablement.
• If churn risk is real and expansion drives growth, farmers can become a key unlock.

3) Decide the “commissionable event”

This one decision determines your whole cash flow risk profile.

Most early comp plans pick one of these:

Option A — Pay on booking (signed contract / closed-won)

Pros: simple, motivating, predictable selling behavior
Cons: can misalign with cash collection, can reward bad-fit deals

This is the most common approach because it’s easy to understand and gives reps immediate feedback.

Option B — Pay on cash collected (invoices paid)

Pros: protects cash, reduces “fake ARR,” encourages deal quality
Cons: delayed gratification, harder to recruit for early roles

This approach is common in industries with heavy nonpayment risk or long invoicing cycles.

Option C — Hybrid: pay partially on booking, partially on payment

Pros: balances motivation + cash protection
Cons: slightly more complexity to administer

A hybrid can be an ideal startup bridge: keep reps hungry while protecting the business.

4) Define clean crediting rules (before edge cases show up)

Startups often delay crediting rules until a deal gets messy — and by then, it’s personal.

A strong early plan clearly defines:

• Who gets credit (rep, SE, SDR, team split)
• When credit is earned (booking date, start date, invoice paid)
• How splits work (ex: 50/50 or aligned to effort)
• What happens with upgrades, downgrades, churn
• What counts as a “new logo” vs “expansion”
• Whether credit is based on ARR, ACV, TCV, or revenue

The clearer these are, the fewer exceptions you’ll fight over later.

5) Keep OTE simple and defensible

At the earliest stage, you don’t need the perfect market benchmark — you need a plan that:

1. Fits your cash constraints
2. Attracts real sellers
3. Encourages the right behavior

A practical starting point:

• A straightforward base + variable split
• Variable tied primarily to one metric (usually ARR booked)
• Clear quota expectation and pacing logic

If your plan requires multiple pages to explain, it’s too complex for your first iteration.

6) Set quota using reality, not hope

A comp plan feels broken when quota feels impossible — even if the math is “fair.”

Quota should reflect:

• Current lead volume and conversion rates
• Ramp time (especially for the first 1–3 hires)
• Sales cycle length and procurement friction
• Pricing maturity (discounting, packaging changes)
• Product readiness and implementation effort

If you’re still discovering your ICP and messaging, quota should include room for learning.

Best practice: separate quota by rep tenure (Month 1, Month 2, Month 3, etc.).

7) Use accelerators carefully (they’re powerful and expensive)

Accelerators drive urgency. They also create unexpected comp costs if you get it wrong.

Accelerators are best when:

• You are confident the unit economics work
• You want aggressive overperformance
• You’re intentionally rewarding top performers

Avoid accelerators if:

• You don’t know the sales cycle well yet
• Your pricing is changing frequently
• Your churn is high and deals don’t stick

If you do use them early, keep them simple:

• A single step-up after hitting quota (ex: 1.25x–1.5x)

8) Put guardrails around discounts and deal quality

Sales teams will respond to incentives — even when it hurts the business.

If comp rewards ARR booked, reps may:

• Over-discount to close faster
• Bring in bad-fit customers
• Push deals that churn quickly
• Sell custom terms that break delivery

Guardrails can include:

• Approval for discounts over X%
• Comp calculated on net ARR (after discount)
• Clawbacks for early cancellations
• Minimum contract term requirements

These guardrails protect you without making reps feel punished.

9) Don’t ignore non-selling work (especially early)

Early reps do more than close: they troubleshoot onboarding, build scripts, and shape pricing feedback.

But you still need to avoid paying commission for “effort.”

A smart approach:

• Keep core plan commission-only for results
• Add small one-time bonuses for early-stage priorities:
  • first 10 customers
  • first enterprise logo
  • first multi-product deal
  • first customer case study

Bonuses can motivate key startup milestones without warping your full plan.

10) Make the plan easy to trust

Reps don’t quit comp plans — they quit confusing comp plans.

Trust comes from:

• Clear definitions (quota, credit, payout timing)
• A simple earnings statement
• Fast answers to questions
• No retroactive changes mid-quarter

Even the best plan fails if sellers can’t predict their own pay.

11) Expect to change it — and build that into the culture

Your first comp plan is a hypothesis.

As your pricing stabilizes, funnel improves, and roles specialize, your comp model should evolve. The best startup comp teams review comp with a structured cadence:

• Monthly: payout audit + exceptions
• Quarterly: quota setting + plan tuning
• Biannually: role design and pay mix adjustments

The goal is not constant change — it’s intentional improvement.

A simple “starter checklist” for founders

If you want the shortest path to a working comp plan, make sure you can answer these:

✅ What behavior are we driving this quarter?
✅ Is this role hunter, farmer, or full-cycle?
✅ Do we pay on booking, cash, or hybrid?
✅ What is the crediting source of truth?
✅ What metric is commissionable (ARR vs ACV vs TCV)?
✅ How are discounts handled?
✅ What does ramp look like for the first hires?
✅ What happens when deals churn or downgrade?
✅ Can a rep predict their commission in 2 minutes?

If you can answer those clearly, you have a comp plan that’s better than most.

Final thought

Your first sales comp plan should do one thing extremely well:
turn your startup’s priorities into repeatable selling behavior.

Keep it simple, keep it measurable, and optimize for trust. The right comp plan won’t just pay your sales team — it will help you build the company you’re trying to become.

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