Sales Compensation & Quota Plan

1 · Executive Summary & Compensation Philosophy

Northwind Signal scaled from 6 to 35 sellers without a comp system, and it shows: pay mixes vary rep-to-rep, quotas are set top-down with no capacity check, only 38% of reps hit quota last year, and a pair of uncapped legacy accelerators produced a windfall the CFO flagged — while a vague clawback cost the company two of its best AEs. This plan installs a defensible, affordable structure ahead of the raise: standardized role-based plans, a bottoms-up quota model, and governance that closes the windfall and dispute risk.

Compensation philosophy. Pay at the 50th percentile of the market (60th for enterprise AEs to win senior talent), reward new-logo ARR most heavily while protecting net retention, and keep the plan simple enough that every rep can compute their own check — paying top-quartile cash only for genuine overperformance through uncapped accelerators.

The Three Moves

1. Standardize to six role-based plans. Replace the deal-by-deal patchwork with consistent pay mixes (50/50 for AEs) and a defensible blended quota-to-OTE of ~4.8x — so two reps in the same seat earn the same way.
2. Fix the engine, not just the pay. The $11M new-logo target is only reachable if pipeline coverage rises from 2.5x to 3.5x and ramping reps are protected; comp design alone cannot close a coverage gap.
3. Install governance. Move to uncapped-with-windfall-review, a tiered enforceable clawback, and a real SPM tool — retiring the spreadsheet, the windfall, and the dispute that cost two AEs.

Expected outcomes

• 55–65% of reps at or over quota within two quarters (from 38%).
• Total cost of sales held at ~21% of revenue at target attainment — inside the 22–25% ceiling.
• New-logo capacity of ~$11.4M validated bottoms-up against the $11M board ask.
• Uncapped-windfall exposure closed; a tiered clawback that is both fair and enforceable.
• Ramp-to-productivity at 5–6 months; the plan documented and live in an SPM tool.

All dollar figures are modeled from the intake and labeled benchmark ranges; they are illustrative and must be validated against Northwind's actual payroll and CRM data before adoption.

2 · Market Benchmarking & Pay Positioning

Methodology. Roles are mapped to the Pavilion/Bridge Group, Radford, and RepVue B2B SaaS datasets by segment (SMB / mid-market / enterprise), aged to mid-2026 and adjusted for Northwind's geography (Austin HQ with CA/NY clusters — roughly a 10–15% premium for the coastal reps). Northwind lacks a paid survey subscription, so the figures below are labeled market ranges, not Northwind's actuals; the “client target” column is the recommended OTE and pay mix.

Two rules applied. (1) Longer cycles get a more base-heavy mix — enterprise AEs sit at 55/45, not 50/50, because a 75–90 day cycle shouldn't put half of pay at risk monthly. (2) A manager's OTE must exceed the average OTE of the reps they manage; at $230K the first-line manager clears the $157K blended AE average comfortably, preserving the incentive to step into leadership.

Posture chosen: target the 50th percentile OTE company-wide and the 60th percentile for enterprise AEs — competitive enough to hire and hold, disciplined enough to defend in diligence.

3 · Role-by-Role Incentive Plan Design

Each role gets one primary measure, a clear rate, and a defined accelerator/floor. AE commission rate is computed as target variable ÷ quota; for closing AEs this lands at ~10% of bookings at full attainment — squarely in the 10–14% benchmark band.

Mechanics that matter

• Quota-to-OTE stays in band: SMB 4.6x, mid-market 5.3x, enterprise 4.8x — all inside the healthy 4–6x range. Nothing is pushed to the 7x+ zone that collapses attainment.
• Accelerators, not caps: pay 1.5x the base rate above 100% and 2x above 120% to keep top reps hunting. Replace hard caps (which made two reps sandbag last year) with a mega-deal review on any single deal over $250K TCV.
• Decelerator/floor: commission begins at 50% attainment; below that, base only — this protects the P&L without a cliff that demotivates ramping reps.
• Draw: a non-recoverable ramp draw equal to 100% of prorated target variable for months 1–3, so new hires aren't punished for the ramp.
• Clawback: 100% if a new logo churns within 90 days, 50% within 91–180 days, none thereafter — tiered for fairness and drafted to survive CA/NY wage-law scrutiny (see §7).

4 · Quota, Territory & Capacity Model

The board wants ~$11M of net-new ARR. Before accepting it, we reconcile it bottoms-up: productive (ramp-adjusted) reps × quota × expected attainment.

At a healthy 75% aggregate attainment, the team produces ~$11.4M of new-logo ARR — the $11M target is real, but with essentially no slack. Expansion (Account Managers, at 104% NRR rising to 108%) adds roughly $0.8M net of base growth after ~$1.9M of expected churn, supporting the path to $30M ending ARR.