How to Craft a Winning AE Compensation Plan

Hiring the right Account Executives (AEs) is just the first step in building a salesforce capable of driving predictable growth. To achieve sustained ARR growth, software companies must strategically align compensation, training, and performance management with broader business goals. A well-crafted AE compensation plan does more than motivate; it sets the foundation for scalable revenue, minimizes churn, and fosters a culture of high performance.

We discuss the intricacies of designing a high-impact AE compensation plan, weaving together best practices and insights from "The Chief Revenue Officer’s Guide" to ensure revenue teams not only hit their quotas but thrive in today’s competitive SaaS landscape.

1. It Starts with a Healthy Funnel

A strong sales funnel gives you the ability to predict revenue with greater accuracy. By understanding how many prospects are moving through each stage—whether they’re learning about your innovative propellers or actively considering a purchase—you can forecast future sales and plan accordingly. This kind of visibility is invaluable, allowing you to allocate resources, set realistic targets, and prepare your team to meet demand.??

On a weekly basis we have a sales operations (SalesOPs) meeting where we go over our pipeline, what’s really in salesforce.com (or hubspot) and test each other on the quality of the leads and if we are talking to the right decision makers for our products.? The pipeline number is shared so the Sales Teams know if their targets are achievable for the near term and it’s also a good time to do a reality check on the size of these opportunities in the pipeline.?

The funnel? also ensures you’re using your time and money wisely. With a clear picture of where prospects are dropping off or stalling, you can refine your approach, focusing your sales and marketing efforts on the leads most likely to convert. Sometimes, the executive needs to jump in with a call or visit and get things “unstuck”.

We use HubSpot and here’s a quick video on customizing your funnel:

Funnel focus and funnel efficiency reduces wasted effort and maximizes your return on investment, all while keeping your team laser-focused on what matters. Now let’s talk about how the AEs will make the $Benjamins.?

2. On-Target Earnings (OTE): Setting the Benchmark

At the heart of any AE compensation plan is the concept of On-Target Earnings (OTE). OTE combines an AE’s base salary with their variable commission at 100% quota attainment. For example, in competitive markets like the Bay Area, OTE for mid-level AEs can reach $350,000, split evenly between a $175,000 base and $175,000 commission.? $350,000 is not bad, a nice home, a Tesla, as long as the AE hits the numbers.?

Beyond Base and Commission: Accounting for True Costs

When planning compensation, companies must account for additional costs such as benefits, onboarding expenses, and sales enablement tools (e.g., Salesforce). As "The Chief Revenue Officer’s Guide" highlights, providing AEs with a robust support structure—like Sales Development Representatives (SDRs), Business Development Representatives (BDRs), and Customer Success Managers (CSMs)—is essential for optimizing performance. However, as your salesforce scales, it’s critical to ensure that these resources are efficiently allocated to control overall costs.

3. Structuring the Ramp-Up Period for Success

A new AE rarely delivers immediate results. It takes time to onboard, train, and get them comfortable with your sales cycle. A well-structured ramp-up plan is critical for accelerating productivity and ensuring early success.

Key Ramp-Up Metrics

• Targeted Quotas: Gradual quota expectations help new AEs transition effectively. For instance, an AE with a $1.2M annual quota might deliver $0 in Q1, $100K in Q2, $200K in Q3, and $300K in Q4 as they achieve full productivity.
• Training and Enablement: Equip AEs with sector-specific knowledge, effective sales collateral, and ready-to-engage leads. The guide emphasizes minimizing ramp-up time by leveraging tools like Salesforce and nurturing qualified leads.
• Regular Feedback Loops: Weekly cadence calls and KPI reviews ensure AEs stay on track and receive support when needed.

Investing in faster ramp-up times benefits both the AE and the company, reducing lost revenue opportunities during onboarding.

4. ARR Categories and Tailored Compensation Plans

Understanding the types of ARR and aligning compensation policies accordingly is essential for driving revenue growth:

New ARR

• Objective: Incentivize customer acquisition.
• Commission Rate: Typically 12%. Multi-year deals or upfront payments may include added incentives.
• Why It Matters: New ARR is the lifeblood of SaaS companies, helping secure investor confidence and drive growth metrics.

Expansion ARR

• Objective: Encourage upsells and cross-sells to existing customers.
• Commission Strategy: Many companies mirror the rate for new ARR, while others allocate expansion-related commissions to CSMs.
• Growth Tip: Modular product designs and flexible pricing structures create natural opportunities for expansion, as emphasized in the guide.

Renewal ARR

• Objective: Retain existing customers to reduce churn.
• Commission Rate: Generally 4-6%, reflecting the lower effort required compared to new ARR. Renewals often shift to CSMs to keep AEs focused on hunting. Of course, there might be some arguments around this so have a clear policy set up.?
• Pro Tip: Offer bonuses for saving accounts at risk of churn to motivate proactive renewal strategies.

By categorizing ARR and tailoring compensation, companies align AE efforts with specific growth goals, ensuring a balanced focus across acquisition, retention, and expansion.

5. Sales Accelerators: Rewarding Overachievement

Sales accelerators, also known as overachievement commissions, are key to motivating top-performing AEs. Here’s an example:

• Base Rate: 12% on quota attainment up to $1.2M.
• First Accelerator: 15% for sales between $1.2M–$2M.
• Second Accelerator: 20% for sales beyond $2M.

High-performance cultures thrive when overachievement is generously rewarded. Accelerators help attract top-tier talent and drive incremental revenue growth. According to the guide, aligning accelerators with company-wide goals ensures that both AEs and the organization win.

6. Quota Setting: Balancing Ambition and Realism

Quota setting is both an art and a science. Unrealistic quotas can demotivate your team, while overly conservative ones leave revenue on the table. Is it $1.6M a year? Or even $1M a year? And how does it increase per year? I’ve had success in the past with 6 months quotas (get the AEs making money quickly). The guide recommends the following principles for quota planning:

• Data-Driven Insights: Base quotas on historical performance, market analysis, and sales capacity.? Know your product and set up your team for success and early wins.?
• Adjust for Variability: Account for factors like ramp-up time, seasonality, and attrition.
• Iterative Review: Continuously refine quotas based on actual performance and market trends.

Capacity Planning

Proactive capacity planning mitigates revenue risks caused by AE turnover. For instance, if you have a team of 20 AEs with a 10% attrition rate, planning for replacements in Q1 ensures minimal disruption to revenue targets.

7. Managing Churn

Churn directly impacts ARR and highlights the importance of quality over quantity in deal-making. Clawback provisions, as outlined in the guide, act as a safety net by allowing companies to reclaim commissions when deals churn prematurely. This discourages AEs from closing unqualified deals and reinforces a long-term focus on customer success.

8. Tools and Processes for AE Productivity

Modern sales organizations depend on a well-integrated tech stack to drive Account Executive (AE) efficiency. Key components include:

• Clean CRM Data: Tools like Salesforce, HubSpot, or Zoho CRM are essential for accurate and up-to-date deal management, ensuring AEs have clear visibility into their pipelines.
• Sales Enablement Platforms: Solutions like Outreach, GONG, and Seismic automate administrative tasks, enabling AEs to focus more on selling and closing deals.
• Team Collaboration Tools: Platforms like Slack, Asana, and Microsoft Teams foster alignment between marketing and sales, ensuring leads are effectively qualified, nurtured, and handed off seamlessly.

A thoughtfully selected tech stack not only enhances productivity but also ensures that AEs can focus on building relationships and driving revenue.

9. Leverage Technology

Let A.I. Be Your Guide

Imagine starting your day with tools like PhoneBurner or Nooks, which automate time-consuming tasks such as dialing, pre-call research, and even note-taking. With these tools handling the groundwork, sales reps can focus on having more meaningful conversations with prospects. Platforms like Sybill or Attention further streamline productivity by providing real-time meeting transcriptions, insights, and follow-up recommendations, ensuring no lead slips through the cracks.

Connecting with prospects becomes more impactful with tools like Humanlinker and Crystal, which analyze customer behavior and personality traits to craft hyper-personalized pitches. Paired with Sendspark or BHuman, sales reps can deliver engaging, customized video messages that capture attention and build stronger rapport. These personalized approaches not only improve response rates but also help salespeople close deals faster, translating directly into higher commissions. Additionally, AI-powered platforms like Aviso and RevSure offer predictive analytics and pipeline insights, enabling sales reps to focus their energy on the most promising leads.

Beyond client engagement, these tools support skill development and continuous improvement. With platforms like SellMeThisPen, salespeople can practice their pitches in real-time, receive actionable feedback, and refine their approach for better results. Behavioral insights from tools like Sybill allow reps to understand both verbal and nonverbal cues during calls, helping them fine-tune their communication strategies. By embracing these AI innovations, salespeople can transform their workflow, exceed quotas, and maximize their earnings while spending less time on administrative tasks and more time driving results.

Please DM us for a free copy of the A.I. sales tool guide

10. Reducing AE Ramp-Up Time

The faster an AE ramps up, the sooner they contribute to ARR. Strategies include:

• Warm, Qualified Leads: Reduce time spent prospecting by providing leads with demonstrated interest.
• Structured Onboarding: Incorporate MEDDIC-based training to help AEs identify decision-makers, pain points, and economic buyers early.
• Ongoing Support: Frequent coaching sessions and access to mentors keep AEs on track.

11. Bonuses and Non-Monetary Incentives

While commissions are critical, additional incentives keep teams motivated:

• Quarterly Bonuses: Tied to team performance or strategic goals.
• Stock Options: Provide long-term value for high-performing AEs.
• Recognition Programs: Highlight top performers on leaderboards or during company-wide meetings.

These incentives align individual performance with broader company objectives, creating a culture of shared success.

12. Key Metrics for Success

Tracking the right KPIs is crucial for evaluating your AE compensation plan. Recommended metrics include:

• Quota Attainment Rates: % of AEs achieving or exceeding quotas.
• Win Rates: Percentage of deals closed relative to opportunities.
• Customer Retention: Renewal and expansion rates by AE.
• Revenue Growth: ARR contribution by AE.

As emphasized in the guide, these metrics provide actionable insights to refine compensation strategies and drive sustainable growth.

Final Thoughts, Use A Guide

Designing a winning AE compensation plan is an investment in your company’s future. By balancing competitive pay, targeted incentives, and robust training, you can create a motivated salesforce capable of driving ARR growth. Leveraging data-driven strategies and best practices from "The Chief Revenue Officer’s Guide" ensures your compensation plan aligns with both short-term sales goals and long-term business objectives.