How to Build Your First Sales Comp Plan

Ryan Heintz, CEO of Alloyed

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I was on a call last week with a technical founder. Raised a solid seed round. Ready to hire his first AE.

Then he asked me a question that caught me off guard.

“So…how do I actually pay this person?”

He wasn’t asking about salary ranges. He was asking something more fundamental: How does sales compensation even work? What motivates salespeople? What’s a quota? What’s OTE? How do I structure this so it makes sense for both of us?

I forget sometimes that this isn’t obvious to everyone. If you’ve never worked in sales or hired salespeople before, the whole compensation model can feel like a foreign language.

So let me break it down. This is how to build your first sales comp plan—sustainably, and attractive to good talent.

Start With the Basics

Most comp plans in B2B SaaS follow the same basic structure: Base salary plus commission.

The base is what you pay regardless of performance. It’s the guaranteed part.

The commission is what they earn on top of that, tied to the revenue they bring in. It’s the variable part.

The industry standard for commission in B2B SaaS is 10% of first-year contract value (also called ACV—annual contract value). This isn’t a hard rule, but it’s the most common benchmark. If your AE closes a $50,000 deal, they earn $5,000 in commission.

Simple enough. But now you need to figure out the quota.

Setting the Quota

Here’s the easiest way to set a quota for your first AE:

Take their base salary. Multiply it by 10. That’s the quota.

So if you’re paying a $100,000 base salary, the quota is $1 million.

If you’re paying $150,000, the quota is $1.5 million.

Why does this math work? Because it creates a healthy ratio between what you pay and what you get.

At 10% commission on a quota that’s 10x the base, your AE will earn roughly equal amounts in base and variable if they hit 100% of quota. A $100K base with a $1M quota means $100K in commission at plan (so $200K total compensation).

This brings us to OTE.

Understanding OTE

OTE stands for on-target earnings. It’s the total compensation an AE makes if they hit exactly 100% of their quota.

OTE = Base Salary + Variable (at 100% to plan)

Using our example:

• Base: $100,000

• Quota: $1,000,000

• Commission rate: 10%

• Variable at 100%: $100,000

• OTE: $200,000

When you’re recruiting, OTE is the number you advertise. It’s what candidates use to compare opportunities. “This role pays $200K OTE” means if I hit my number, I make $200K.

The split between base and variable matters too. A 50/50 split (like our example) is common for AE roles. Some companies go 60/40 or even 70/30, which means more guaranteed money and less tied to performance. The more variables, the more upside—but also more risk for the AE.

For a founding AE role, 50/50 is a reasonable starting point.

The Health Metric That Matters

Here’s why the “Base × 10” formula works so well: it automatically creates a sustainable business model (assuming classic SaaS margins).

A healthy AE comp plan generally lands between 4x and 6x. That means the revenue an AE brings in should be 4 to 6 times what they get paid in total compensation.

Let’s check our math:

• AE sells $1,000,000 (hits 100% quota)

• AE gets paid $200,000 (base + commission)

• Ratio: 5x

Right in the middle. 

If your AE sells $800K and you pay them $200K, that’s 4x—on the lower end, but still workable.

If your AE sells $1.2M and you pay them $200K (plus some accelerator, which we’ll get to), that’s 6x—very healthy.

This assumes normal software margins of 90%+ gross margin. If you’re running a services business or have lower margins, the math changes. But for a typical SaaS company, the 4-6x range is your target.

Why does this matter? Because you can run this comp plan forever. It’s not a money-losing structure that you’ll need to claw back later. It’s sustainable unit economics from day one.

Now Add Accelerators

Here’s where it gets interesting.

Accelerators are a tool that lets you pay AEs significantly more money for overperformance, in a way that makes you happy to do it.

Every founder hiring their first AE has the same fear: “What if I pay this person $150K in salary and they don’t sell a single deal for five months?”

That’s a real risk. And accelerators don’t eliminate it. But they do let you structure compensation so that when things go well, they go really well—for both of you.

Here’s how accelerators work:

The standard commission rate (10%) applies up to 100% of quota. That first $1 million in our example.

Once they exceed quota, a higher commission rate kicks in.

For example:

• $0 - $1M in sales: 10% commission

• $1M - $1.5M in sales: 15% commission

• $1.5M - $2M in sales: 20% commission

So if your AE sells $1.5 million:

• First $1M: $100K commission (10%)

• Next $500K: $75K commission (15%)

• Total commission: $175K

• Total comp: $275K (with $100K base)

If they sell $2 million:

• First $1M: $100K (10%)

• Next $500K: $75K (15%)

• Next $500K: $100K (20%)

• Total commission: $275K

• Total comp: $375K

That’s a lot of money. And you should be thrilled to pay it.

Because if your AE is making $375K, it means they sold $2 million in business. Your ratio is still above 5x. The economics still work. And you’ve got an AE who’s crushing it and highly motivated to keep going.

Why Accelerators Create Alignment

The psychology here matters.

Every AE wants to get to the accelerator tiers. They want the 15% rate, not the 10% rate. They want the 20% rate even more.

So what do they do? They try to hit quota as fast as possible.

They don’t pace themselves. They don’t sandbag deals to push them into next quarter. They run.

This is exactly what you want as a founder. You don’t want your AE to hit quota on December 31st. You want them to hit quota in July so they can spend the back half of the year in accelerator territory, making more money and bringing in more revenue.

Accelerators turn your comp plan into a game where winning means everyone benefits.

The AE makes more money. You get more revenue. The incentives are perfectly aligned.

The Advanced Move: Buying Down the Quota

Here’s a more sophisticated play that can help you attract great talent.

What if you artificially decreased the quota to help your AE reach accelerators faster?

Let’s go back to our example. $100K base, $1M quota, standard structure.

But what if you set the quota at $750K instead?

Now your AE hits the 15% accelerator tier at $750K instead of $1M. They reach the 20% tier at $1.25M instead of $1.5M.

You can use this as a recruiting tool. Run the models for candidates:

“If you sell $1.5M with us, here’s what you’d make at a company with a standard $1M quota. And here’s what you’d make with our $750K quota structure.”

The difference is meaningful. And for a high-performer who’s confident in their ability to sell, that accelerated path to higher commission rates is very attractive.

Yes, you’re paying more per dollar of revenue in this structure. But you’re also signaling that you believe in upside. That you want your AE to make a lot of money. That you’re building a culture where overperformance is rewarded aggressively.

For the right candidate, that matters.

Putting It All Together

Let’s build a complete comp plan from scratch.

The Role: Founding AE

Base Salary: $120,000

Quota: $1,200,000 (base × 10)

Commission Structure:

• 0 - 100% of quota ($0 - $1.2M): 10% commission

• 100 - 125% of quota ($1.2M - $1.5M): 15% commission

• 125%+ of quota ($1.5M+): 20% commission

At 100% to plan:

• Base: $120,000

• Commission: $120,000

• OTE: $240,000

At 150% to plan ($1.8M in sales):

• Base: $120,000

• Commission on first $1.2M: $120,000 (10%)

• Commission on next $300K: $45,000 (15%)

• Commission on next $300K: $60,000 (20%)

• Total comp: $345,000

Health check at 150% to plan:

• Revenue: $1,800,000

• Comp: $345,000

• Ratio: 5.2x ✓

The math works. The incentives are aligned. The structure is sustainable.

Common Mistakes to Avoid

A few things I see founders get wrong:

Mistake 1: Setting OTE too high with a low base.

I’ve had founders tell me, “Let’s keep the base low but give them a really high OTE so we don’t have to pay as much upfront.”

This doesn’t work. Good AEs see through it immediately. A $80K base with $300K OTE signals that you either don’t understand comp plans or you’re trying to minimize your risk by pushing it all onto them.

Keep the split reasonable. 50/50 or 60/40 base to variable.

Mistake 2: No accelerators.

A flat 10% commission regardless of performance is boring. It doesn’t give your AE anything to run toward. Add accelerator tiers—even if they’re modest—to create that pull toward overperformance.

Mistake 3: Overcomplicating it.

Your first comp plan doesn’t need to account for every scenario. Keep it simple. Base × 10 for quota. 10% commission. Two or three accelerator tiers. You can add complexity later as you learn more about your sales motion.

Mistake 4: Not modeling it out.

Before you finalize anything, build a simple spreadsheet. Model what your AE makes at 50%, 75%, 100%, 125%, and 150% of quota. Make sure the numbers make sense at every level. Make sure you’re happy paying what you’d owe at the high end.

The Bottom Line

Building your first sales comp plan isn’t complicated, but it does require some intentionality.

• Start with the basics: base salary × 10 = quota, 10% commission, 50/50 split. This gets you to a 5x ratio and a sustainable structure.

• Add accelerators to create upside for overperformance. This aligns incentives and attracts ambitious talent.

• If you want to get aggressive, lower the quota threshold to help your AE reach accelerators faster. Use it as a recruiting differentiator.

• And always check your math. Make sure the structure works at every performance level—not just at plan.

• A good comp plan does two things: it attracts the talent you want, and it creates incentives that are good for everyone.

Get this right, and you’ve built a fantastic foundation for a sales team and the future growth of your company.