How Hard Is It To Get Cold Email Replies? Chasing the odds and cracking the code…

I tend to get overly excited when I ever I get a positive response from a prospect to a cold email.

I feel as if I cracked some code to gain that momentary share of attention bandwidth and now I’m “in”. From the likely dozens to hundreds of emails that individual received, they chose to take the time to respond to mine…

I realize sometimes its PSL (pure sh*t luck) or simple name recognition but I’d like to attribute some of my success to being thoughtful and deliberate in the approach. Keeping the email simple, relevant and familiar seems to be the key to getting that initial engagement.

In thinking about the metrics behind “cracking the cold email code”; I started wondering what are the odds of my email being seen, let alone opened, let alone responded to no matter how creative and thoughtful I was.

I decided I’d start with the general question of “how many b2b emails are sent on a daily basis”. Most of the data that I was able to personally find that felt “real” (e.g. backed by research) was dated…it seems like 2011 was the last year I could find consistent or comparable figures from multiple sources on email trends. I could find anecdotal stuff from one vendor or data from a survey etc; but trying to validate those figures from multiple sources proved challenging. Either I’m looking in the wrong places (likely), or these research firms simply chase the shiniest trend or the press just isn’t covering this as much so the content isn’t as well indexed. The good research on email was generally pre-mobile and pre-social; so maybe these firms just shifted their attention and focus.

Does that mean email is dead or dying?

Not a chance; but like all things digital it’s obviously evolving. Even with the explosion of social sites, webapps and mobile – all these things require an email address for the most part as a form of digital currency proof of identity / user name.

I did find one source of email trend data that at least had a history of providing information consistently. The Radicati Group out of Palo Alto, California describes themselves as the “Leading analyst firm covering Email, Social Media, Instant Messaging, Security, Wireless, Archiving, eDiscovery, DLP, Unified Communications and more” I’ve never heard of them previously (which means absolutely nothing in terms of their credibility) but there is a nice library of market research information available on their website; most of which is pay to access. I did read the executive briefing they made publicly available on the Email Market for 2013-2017 (link below) and wanted to pass along some interesting figures they share:

  • Counting both business and consumer users (unique individuals?); there are over 2.4 billion email users worldwide. There are about 7 billion people in the world; so that number feels “right”. They forecast that number will grow just 3% a year through 2017. I’m guessing internet accessibility in 3rd world countries supresses that growth.
  • Counting both business and consumer accounts (unique addresses?), there are 3.9 billion accounts; growing to 4.9 billion by 2017 (growth rate 2x number of users); why the difference? Most people use more than one email address…reasonable.
  • Worldwide email traffic (business and consumer) is estimated at 182 BILLION EMAILS PER DAY; expected to grow to 207 BILLION EMAILS PER DAY in 2017. This is only a 3% increase YOY…but that is a serious huge number… Doing the math; that says the average user gets about 75 emails per day (182 billion emails divided by 2.4 billion users) – that math checks out. Separating the business and consumer is where it gets interesting…
  • Business alone counts for over 100 Billion of that 182; and they expect business emails to go up 7% per year while consumer emails to decline by 3% per year. I buy those numbers, we’re emailing friends and family less frequently due to social and texting – but the business world is still heavily reliant on “traditional” email for both internal and external dialog. I would even buy a much steeper decline on consumer / personal than they illustrate and sharper increase on business.

So…let’s go back to my original question that prompted this and figure these odds out; let’s say 65% of email users have a business email account. I’m taking some liberties there and probably too generous, but unemployment rate plus service / retail jobs that don’t have business email addresses…that means 1.55 billion business email users (65% of 2.4B) and with 100 billion business emails per day; that equates to about 64 business emails per day per professional (lower than I would have guessed).

Now we have to start thinking internal business emails vs. external business emails and associated open rates of each etc.. This made my head hurt…but playing with numbers from my gut; I said 40% of these emails were external (e.g. knuckleheads like me) and we probably are in the industry average 25% open rate and 5% click thru rate (I’m equating a click-thru with a reply).

So this leads to roughly 26 external business emails per day; about 6-7 of those are opened per day, and 1.3 click-thru’s or replies…so with my 1 reply received; I guess I was the lucky winner that day and cracked the code to get the attention this individual had for that 1 of 1.3 external email correspondences he /she had that day with external emails…



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Reality of Social Attention Bandwidth – Staggering Statistics on Activity

If your content marketing or social strategy for 2014 is overly focused on generation of content vs. a deliberate balanced plan of generation AND distribution; it’s a high likelihood that your return on investment won’t be optimized or even realized.

It is a fact that consumers and professionals have limited attention bandwidth as-is; there’s just too much noise and not enough signal. The mountains of new content and distraction options that are being cranked out are only going to make the landscape more and more fractured.

If you think it’s difficult to get attention for your content today; what’s going to happen as content belching increases 2x, 3x or 4x in 2014? Stop overly focusing on the generation and start being pragmatic about the distribution.

In the interest of illustrating the point of attention bandwidth…there are:

1. 100 hours of video uploaded to YouTube every minute
2. 500 Million Tweets per day
3. 4.5 billion average daily Facebook likes per day
4. 10 billion Facebook messages sent daily
5. 55 million photos shared on Instagram per day
6. 1.2 billion Instagram likes per day
7. 1 billion Google searches per day

How are you going to stand out as a strong signal in all that noise?

2: Twitter IPO Filing
3 & 4:
5 & 6:

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A big mistake your B2B sales team is likely making…

Focusing on the Decision Maker vs. the Decision Making Process

A single decision maker for b2b purchases is increasingly a myth. Focusing on trying to convince a decision maker vs. focusing on understanding the decision making process is a mistake even experienced sales professionals make. In today’s b2b world, most businesses have some process of prioritizing projects and internal resources in addition to budgets. Rare is the case that someone wants to 100% own the responsibility of signing an agreement, spending budget money and owning a project when it’s likely other projects were seeking those same funds and resources.

A caveat here, if the firm you are selling to is very small or your product is transactional (e.g. non-subscription) and relatively inexpensive (e.g. less than $5,000) the below may only loosely apply  – but even President / Owner / CEO’s seek other’s opinions before signing on the line that is dotted.

Asking whether or not someone has the authority to make a decision is a pretty standard 101 question that will rarely give you enough information or insights to either accurately forecast the sale or even move the sale towards closing. This self-identified “decision maker” likely can make a decision, but that decision is usually whether or not they want to pursue the deal internally vs. actually making the final decision on the go/ no-go.

No matter what you are selling, every business has a list of projects in a queue waiting priority and you are competing with the attention bandwidth applied to those items; whether they are related to your offering or not. A better course of action is to seek clarity how decisions are made within the organization; including the financial decision as well as the project priority process.

How do you do that?

Ask better questions related to the process itself once you’ve earned the right to do so. Below are some very simple examples that you can adjust to your specific situation:

  • Mr. Prospect, based on my experience working with other clients, there are often other individuals at the business that like to be aware of what my company will be providing to your business; if only to avoid any confusion once you’ve made a decision. When your business has made similar purchase decisions – how did that process work? Do you typically involve others in the evaluation process as well? How do you recommend we work them into this process to make this as smooth as possible?
  • Mr. Prospect, I have to imagine there are other projects looking for budget or resources that might be unrelated to this; where do you think this project would fit into those priorities at the executive level and how do we best work together to help you navigate that?

TIP: Don’t fall easy victim to the false positive of your proposal going to executive committee / management meeting or board meeting for review. Always clarify that your proposal is on the agenda and a priority. All too often I’ve heard a deal forecasted because it was going to committee for final signoff only to learn that the board never got around to discussing the proposal and it’s pushed off to the next meeting.  Make sure your sales executives ask the question “are we formally on the agenda for the meeting as a priority?” It might feel uncomfortable to a sales rep to ask that (which I don’t get) but without confirmation, you are flying blind.

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Top organic listing on Google gets just 8.9% of clicks…

Pretty thought-provoking article and “infographic” here on google SEO vs. PPC trends; some highlights from my POV:

  • Top organic listing on Google gets 8.9% of clicks on page; 8.9% is still huge; but tells you how much the paid ads are getting overall – nearly 42% of all clicks go to first 3 paid listings.
  • Interesting how “pixel dominance” of paid ads is impacting click rates.
  • 89% of paid ad search traffic is “new” traffic that is outside organic reach.


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Consistently leveraging LinkedIn within your Sales Organization

I am stating the obvious that your sales team likely uses LinkedIn, after all – they are the world’s largest professional network with 225 million members in over 200 countries and territories around the globe..

Executives from all F500 companies are members of LinkedIn and according to LinkedIn – more than FOUR BILLION searches were conducted in 2012…FOUR BILLION b2b company, individual or job related queries…Clearly not only is it one of the world’s largest social networks, in a sense, it’s one of the world’s largest search engines as well.

While it’s heavily utilized by individual account executives, in my opinion it is not consistently utilized by overall sales organizations.

If you were to talk to your account executives individually, they likely have different methods and approaches on how they use the tool, represent themselves and incorporate it into their prospecting and pipeline strategies.

I’ve done a few presentations and classes on using LinkedIn for sales organizations and can attest that for those organizations making a more formal approach to including LinkedIn as a part of their sales process – it will “shorten the cycle” in creating and expanding client relationships and when used appropriately, can also help to further positive perception of your company.

In today’s over contacted and limited attention bandwidth world, leveraging a prospect’s social connections can be more effective contact method than dialing and email campaigns as it’s often easier to connect with someone “socially” cold than other methods. People read and respond to LinkedIn emails differently than your own and it’s a quicker route through aggressive spam filters. Your prospects are spending time on this platform – they appreciate recognition and connections.

I wanted to pass along a pretty rudimentary but underutilized feature of LinkedIn that you can immediately incorporate into your organization. If you are interested in more comprehensive ideas or training – drop me a line; I’m happy to share what I’ve aggregated.

Let’s focus on “Advanced Search” and how to use LinkedIn’s Advanced People Search capability to identify prospective buyers or influencers at target prospect companies.

For example, if I’m looking for people who currently work at Honeywell in a finance role, I could just search for the keyword “Honeywell” or “Honeywell Finance” from Linkedin’s homepage.  Unfortunately, that will match everyone who has “Honeywell” or “Finance” on their profile, either from a former job, or even just called out somewhere on their profile.

Using advanced search (click “advanced” next to the search box on the homepage), you can specify “Honeywell” in the field directly for company in the text box on the left hand side of the page, “Finance” for the title text box. For both options, you can ensure it’s an active employee or current role by even specifying “Current” in the drop box that appears once you populate the text in either field.

That will give you a tight search that only returns people who currently have Honeywell as their current company and finance in their current role.

Submitting this search shows matching results based on relation to my network – Results are ranked by network relationship…1st results also show whether you have any shared connections (annotated in green font) and whether you have groups in common etc.

By clicking on the green, you can see who the shared connections are; and ask those connections whether this individual is someone you should be connecting with or even ask for an introduction to them.

Think of the power this “FREE” utility has just given you as a sales person…you now have eyes into org charts and rolodexes of all your clients and prospects…FOR FREE.

Once LinkedIn shows you how you are related to these prospective buyers, your task is to figure out how to get introduced to them and connect with them:

Some ideas:

• Do you both know someone in common? If so, ask that person to introduce you. Explain the value that you may be able to provide to their contact.

• Do you both belong to a common group? If so, send them a LinkedIn message to discuss your common interest / membership and why it might make sense to connect (many groups allow you to email other members once you join)

• If their LinkedIn profile shows their employer location or information, simply find the company’s telephone number and cold call them.

You can also use LinkedIn when given a contact name from a gate-keeper; it allows you to confirm their title via LinkedIn:

• Are they at the right level?

• Is your contact a “manager” level when there are several director level folks at the company? The gatekeeper might be referring you too low in the organization.

• Who might they report into?

• Other folks who might be in the decision making or influence tree?

• Do they have any prior experience or job roles that they might pull perspective from?

• Any common connections or groups?

It’s pretty straightforward application use; just remember that once you have established yourself on Linkedin – nurture your first-degree network.  If you plan on asking your contacts for favors, please remember to keep in touch with them and to deliver value to them (e.g. post a news story or article of interest to your profile or send a web link to a resource that you think they will find useful) or sharing their posts and commentary….you do not need to write original content…simply pass along what others have done. Not nurturing your network will restrict what they are willing to do for you going forward.

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Three Big Mistakes Start-ups Make in Sales Planning & Operations

I’ve spent the better part of the last 15 years either working for a B2B start-up / small company or speaking to others who were doing the same. In my humble opinion, there are a few key mistakes I see these companies make related to sales planning and modeling (I’m not immune to these mistakes myself).

They are recoverable if addressed in time, but often if they aren’t addressed the problems cascade into bigger issues that can impact the ultimate success of your company.

As a service to my peers; here are the 3 bigger mistakes that start-up b2b firms make related to sales planning I’ve seen; simplified for your consideration.

You’ve overestimated your target market

Young companies often struggle to define their target market and set their sights too broadly. By assuming your target universe is larger than it really is typically drives you to have a larger than you need sales force (and associated infrastructure and marketing costs) and unrealistic penetration expectations. Your business will grow at a faster and more sustainable rate if you put a realistic filter on which are the true “more likely” customers and put a hyper focus on penetrating this smaller universe.

For some reason, start-up companies and entrepreneurs are uncomfortable narrowing their definition of runway for fear of tempering growth potential and I suppose ultimate perceived valuation. No one wants to put a self-imposed limit on how their idea is going to change the world; but you need realism. The danger of not accurately defining your runway of potential customers is a greater distraction and detriment to growth and valuation. If you are not “right sizing” your prospect universe, I can guarantee that you are:

  • Diffusing your efforts through pursuit of all potential prospects, agnostic to propensity.
  • You are absolutely spending a large amount of sales & marketing resource, effort and time against a very unproductive class of prospect and likely discounting way more than you need to in order to penetrate them.
  • Your focus, attention and effort against unproductive prospects will influence your development of lower end products in an attempt to increase penetration as opposed to focusing on higher-end products for those clients who have higher propensity to buy.

You aren’t segmenting your message and approach

If you have “right sized” your universe as suggested above; it’s highly likely that certain market or industry segments stood out in that propensity modeling. If those markets are “self-referencing” (meaning they pay attention to each other); you have an opportunity to drive productivity and pricing power at the same time through a disciplined segmented sales & marketing approach.

Identify the top 3-5 markets (if they can be differentiated enough) and move people and accounts to make them wholly focused on those markets and align the right kind of marketing support so you can establish industry leader perception and market beachheads. It’s all or nothing into the markets you choose to start with.

I can’t stress it enough – it can’t be half-assed. You need to give people enough of a tight focus, don’t be fearful of reassigning accounts. The more aggressive you are in targeting the right segment of the market, the less money, resources and time you’ll waste on people who simply aren’t interested.

Let’s say Consumer Goods stands out as a market; build a team to focus only on that vertical; move all associated prospect and client accounts to that team, get them using “vertical” collateral, websites, targeted / vertical messaging, client references etc. so when they are calling on the market – they stand out as truly knowing and specializing within that market; that gives you leadership perception and thus pricing power and ,more than likely improved productivity.

Establishing Unsupported Individual Activity & Productivity Expectations

You likely have a revenue goal that back solves to a productivity expectation by account executive headcount.

  • Does your new right sized prospect universe worked out above and current sales cycle knowledge still support those headcount model assumptions?
  • Do you have enough “quality” prospects to keep your current sales force productive enough to attain your goal numbers and thus, retain high performers?

I know this seems obvious and basic; but I’ve seen it all too often when there are productivity expectations that seem believable; only to have them come into question once a true prospect universe analysis is done in conjunction with knowledge and facts of a realistic sales cycle.

For example; let’s say your redefined prospect universe is 100,000 potential B2B customers. To attack this market; you’ve modeled a headcount of 50 sales reps. As a result, each rep has 2000 accounts and you expect an account executive to close 4 new customers a month out of this pool; or 48 a year or a 2.4% penetration. That number, without knowing anything else, seems believable on the surface but let’s dig deeper.

What is your current conversion rate of pipeline accounts (“opportunities”) to wins?

In this example, let’s say it’s 20%. Based on this, to secure 48 new accounts; you need 240 opportunities per year (20% of 240 = 48). 240 opportunities require 20 a month; or roughly 5 new opportunities per week. I don’t know your business – but is this still believable to you? Perhaps – after all what solid account executive can’t add 1 new opportunity per day to their pipeline?

How many prospect dialogs / engagements turn into opportunities?

If you don’t know this number, you owe it to yourself to find out; but let’s SWAG it and say 1 out of every 2 “engagement dialogs” turn to opportunities. Based on this simple math, you need 480 engagements out of the 2000 assigned accounts to net 48 new customers; or each AE needs to engage with 24% of their assigned accounts per year to net 48 new customers. Is the expectation still believable? I mean why can’t an AE engage with 480 accounts per year? That’s only 40 per month; or 10 a week…2 a work day…I mean come on; what are the AE’s doing all day anyway?

Before we replace our AE’s who can’t do this; let’s dig a little deeper. How many individual accounts (prospects) do your AE’s need to attempt to connect with before an account engages? Is it 1 in 2, 3 or 4 or more etc?

At 1 in 4; they need to attempt to engage with all 2000 in a year to get 480 engagements to convert to 240 opportunities to net 48 new customers…this model is feeling a little shaky at this point as it has no margin.

My proposed rule of thumb is that if you are expecting an AE to engage with more than 20% of their assigned accounts per year in order to hit productivity expectations; you owe it yourself to validate whether that is realistic based on any data you currently have on your sales cycle. This rule of thumb is fraught with issues that come with any rule of thumb;  for it to be realistic; you need to know the realities of your sales cycle.

  • How many prospecting calls or appointments do your top sales representative makes in a week and how many of those engage and turn into opportunities or proposals?
  • How many does the lowest-performing salesperson make?

I can guarantee you that if you do this exercise you will either be surprised or greatly disappointed. I suspect the levels are lower than you expect and you are going to get upset at yourself or your leaders for not paying more attention but the answers to those questions will help you model your true sales cycle.

If you find your model is off – what can you do to rectify it and make it more believable?

  • Can you improve the conversion of opportunities to wins?
  • Can you improve the engagement rate of suspects and prospects?
  • Do you need to reduce the number of sales people you have?

I suspect that you can answer some of the above through segmentation (mistake #2 above) via sales and marketing messaging & training supported through tighter integration of marketing lead generation / nurturing. I’m also going to guess you probably have more sales people than you really need; a smaller sales force isn’t a bad thing,

The truth is in the details of your specific business; but you owe it to yourself to go through the exercise and uncover the mistakes you might be making now while it’s still early.

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Startup Sales 101: Establishing Commission Plans

In 13 of the past 15 years, I had the opportunity of working with a VC backed startup that we took from initial funding to commercialization to exit. Along the way we tried various sales organization deployment models trying to find the silver bullet model that would hyper-accelerate our sales growth. Like most start-ups; we were chasing revenue and the number of total clients we had in our fold.

We were fortunate that our VC firm gave us plenty of exposure to other portfolio company models and resources to learn from. In the 13 years I was involved with sales, sales planning and sales management – we tried all the variations you can think of for deployment models; some successful – some not but we learned from all of them. The variations we tried, but not limited to, included:

  • Regional Deployment
  • Industry Type / Segment Deployment
  • Inside Sales / Field Sales
  • Hunter / Farmer Splits
  • Book of Business Management (AE owns the account after their initial sale)
  • Strategic Account Targeting
  • Telemarketing for appointments
  • Telemarketing for entry-level sales

All these different deployment models and job roles required a corresponding compensation plan – and I was responsible for authoring, delivering and revising them. Compensation plans can be a headache, but my experience has absolutely convinced me the greatest way to influence account executive behavior is through their compensation plan.

The best designed compensation plan for the sales team is easy to communicate and track, it attracts and retains top sales talent, rewards the behaviors that tie to company objectives, improves morale, enhances customer service, and increase revenues.

If the current model for your business assumes an average annual sales revenue contribution per active sales head and you value regular deal volume over the year versus fewer, larger transactions at the end of each quarter or worse, the year – you need to leverage both commission and incentives to achieve this desired result.  Whether you have a hunter / farmer or a book of business philosophy to sales deployment – a comp plan based on annual sales performance with incentives leveraged to even order flow over the year has proven to be the most effective in my experience. The commission is rooted to the annual sales expectation while the incentives are used to achieve smoother sales production over the year.

The below are a few variations and samples of comp plans that I’ve found the easiest to explain and track – while driving the behaviors needed and expected from a sales organization.


Yearly Revenue or Sales Order Based Commission Plans

The commission portion of this plan helps drive overall full year performance while the incentives try to drive an overall consistent order flow. The accelerated commission rate drives Account Executive (AE) retention for strong performers who are rewarded incrementally for attaining and surpassing target quotas.

Example: Yearly quota with weighted target variable commission that starts at “dollar one”

This plan works for someone with a full year target quota and is product mix agnostic (“a dollar is a dollar” to the business). To even order flow, quarterly incentives are leveraged – however this could be broken into monthly incentives based on desired outcome.

This plan is best authored by first determining an appropriate target commission payout (also referred to as “on target commission” or OTC) for the specific annual quota performance. Said more simply; you need to determine what achieving annual quota is “worth” to the business and thus what portion you would pay to the AE. Please note; this is more complicated than I’m laying it out to be – I’m ignoring contribution margins etc. but you get the idea I’m sure.

Based on this OTC; create a weighted index commission rate that pays commission on each sales dollar and accelerates payout rate as account executive nears annual quota target.

The annual quota should then be broken into reasonable quarterly targets for incentive purposes. This requires some business or domain specific insight for your specific market. In my prior company – Q4 was the largest portion of the quota, followed by Q1, Q2 and then Q3.

Example 1A – Retroactive Commission

  • Establish individual target quota; in this example we’ll say that number is $500,000.
  • Break this quota into quarterly components; in this example we’ll do that as follows:
    • Q1:30% ($150,000)
    • Q2: 20% ($100,000)
    • Q3: 15% ($75,000)
    • Q4: 35% ($175,000)
    • Set On-Target Commission (OTC) payout commensurate with this quota attainment. In this example we’ll set it at $50,000 in OTC for 100% quota.
    • Set quarterly incentive payouts commensurate with this quota attainment. In this example; we’ll use 20% of annual OTC or $10,000 total; separated equally per quarter ($2500/per quarter).
    • OTC and Incentive at target would be $60,000 on top of base salary.

Commission Portion:

In a straight line commission plan – the AE would simply earn 10% commission in order to earn $50,000 from $500,000 in sales. However this type of straight line plan has no weighting to drive behavior towards goal, it has no ‘penalty’ for below plan attainment; nor does it have ‘stretch’ components to drive over plan performance.

To drive all the above; weight the commission rate downward until a certain minimum tier or tiers are achieved; whereupon the commission rate accelerates and pays additional retroactive commission to “catch up” commissions for earlier sales. This also has a nice “reward” component of hitting quota as the retroactive commissions really drive towards quota attainment. This plan also doesn’t overpay too much for over plan performance but also doesn’t stop the account executives’ drive for every dollar post-quota.

We’ll use a single tier at 80% to quota to keep things simple. After 80% to quota, commission rate will adjust to target commission and retroactively pay earlier sales incremental commission to “catch” up to target commission rate. I’ve seen as many as 5-tier plans, but that feels a bit much, 1-3 tiers are enough in my opinion. This plan will also continue to pay at the “final” elevated commission rate for all sales over quota; so it helps push the AE to keep going even after hitting quota.


  • From $1 to $400,000 – commission rate is set at 6%
  • From $400,001+ – commission rate accelerates to 10% for sales above $400,000 and an incremental 4% for sales $1 to $400,000 to “catch up” commissions for hitting quota.
  • Commissions over quota continue to pay out at accelerated commission rate

1A. Commission Payout Table

Sales Performance

Total Commission Payout Earned


$21,000 (6% x Performance)


$24,000 (6% x Performance)


$47,500 (10% )





Incentive Portion

With the $2500 per quarter incentive; simply tie the full payout to the full quarterly expectation. Since this is incentive vs. commission; there should be a narrower range of performance where incentive is earned. To clarify, an incentive is tied to a target – you either hit that target or you don’t. That being said, you can provide a minimal amount of downside protection if desired; for example at 90% to quarter – 50% of bonus is earned but there is no reason to overly reward a result that doesn’t equal the target needed for an incentive to be paid. This is an incredibly important mindset to have, the incentive portion of an account executives compensation plan needs to not be perceived as “guaranteed” like commissions; its incremental earnings for meeting performance expectations. Likewise, there isn’t a need to provide upside on this incentive either IF you allow them roll-forward over performance or catch-up opportunities for missed quarters to mitigate sand bagging. Let me explain each of these a little cleaner:


  • Roll-Forward: Let’s say the AE could blow out their Q1 target based on the timing of a huge deal. The AE might expect a larger quarterly incentive payout since they surpassed their quarterly goal. Instead, cap the payout at $2500 but allow them to roll-forward the over quota amount towards their Q2 target so that your incentive payout for the full year would never surpass the budgeted amount of $10K for the year. Roll-forward applies to Q1, Q2 and Q3 only – never roll payouts from one-year to the next; it gets messy.
  • Catch-Up: Let’s say the AE skunks their Q1 and earns no quarterly incentive but blows out their Q2 so at the end of Q2 their performance equals what was expected for both Q1 and Q2 combined. Pay the full Q2 @ $2500 and, depending on your philosophy, 100% of Q1 missed or some % of Q1 missed as a “catch-up” opportunity. From my perspective, you are trying to manage order flow timing so I would pay a portion of Q1 only vs. full 100%. Catch-up payments are good to use if only to manage against an account executive throwing in the towel in a quarter where they aren’t performing well and sandbagging for the next quarter.

Example 1B (no retroactive payout):

Like the first example; this plan is best authored by first determining an appropriate target commission payout (OTC) for the specific annual quota performance and create a weighted index commission rate that pays commission on each sales dollar and accelerates payout rate as account executive nears annual quota target. There is no retroactive component; so the accelerated commission rate ONLY applies to those sales over the tier(s).

  • Establish individual target quota; in this example we’ll stay with $500,000.
  • Break this quota into quarterly components; I’m using the same as in the first example:
    • Q1:30% ($150,000)
    • Q2: 20% ($100,000)
    • Q3: 15% ($75,000)
    • Q4: 35% ($175,000)
    • Set target annual variable commission payout commensurate with this quota attainment. In this example we’ll keep it at $50,000 in on target commission payout (OTC).
    • Set quarterly incentive payouts commensurate with this quota attainment. In this example; we’ll continue to use 20% of OTC or $10,000 total; separated equally per quarter ($2500/per quarter).

Commission Portion:

In this example; we’ll use a single performance tier set at 80% to quota, or $400,000. After $400,000 in sales, commission rate dramatically accelerates so that target $50,000 in commissions is paid on $500,000 in sales attainment.

  • From $1 to $400,000 – commission rate is set at 6%
  • From $400,001+ – commission rate accelerates to 26% for sales above $400,000 only; there is no retroactive component.
  • Commissions over quota continue to pay out at accelerated commission rate

1B. Commission Payout Table

Sales Performance

Commission Payout


$21,000 (6% x Performance)


$24,000 (6% x Performance)


$43,500 ($24,000 for 1st $400,000 + $19,500 for $75,000 over $400,000


$50,000 ($24,000 for 1st $400,000 + $26,000 for $100,000 over $400,000


$63,000 ($50,000 for quota attainment plus 26% for every dollar over quota)

For over plan performance; this plan is a rich one; so make sure you set performance tier(s) appropriately.

Incentive Portion

No change from the incentive described in the 1st example.

Additional Notes:

Document, Document & Document: Document your comp plans and get peer review to make sure no portion of it is ambiguous. Your written plan documents should include plan goals, definitions, commission and incentive payment structure, exceptions, assigned quotas and examples. Make sure whoever leads the compensation meeting allows ample time and is prepared to answer all questions posed by the sales team. It’s incredibly valuable to use examples when rolling out a compensation plan; use 3 scenarios – slightly under plan, on plan and exceeding plan to show the difference in earnings for the account executive.

Stretch Bonus Targets: If you want super stretch targets; consider using a bonus payout vs. change in commission structure. The bonus would be incremental to commissions. Some $ payout tied to hitting 110% or 115% to full year quota; this would be an “all or nothing” stretch bonus incremental to their calculated commissions.

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