Jason M. LemkinCEO, SaaStr · Co-Founder of SaaStr AI, SaaStr Fund, Adobe Sign

How to Determine if Investing in Sales is Worth It

26 Feb 2024 · 1 min

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Jason M. Lemkin explains how to judge whether investing in sales is worth it by breaking down typical sales compensation and upfront cash commitments. He uses a $140k on-target-earnings example (50% base / 50% bonus), noting the employer really pays about $6k/month in cash for a couple of months and estimates an upfront investment of roughly $20,000; his advice: if you can’t find ~$20k to fund the experiment, don’t hire, and ensure the plan is a win–win.

Chapters

How can I pay 140? Well, let's break it down for a minute. First of all let's be tactical. It's usually 5050, right? 50% base, 50% bonus for a sales rep. So they're really only taking home a 70k base trying to make another 70. Okay, and then 70 divided by 12. Help me do my math. It's not quite 6k a month. Well maybe with taxes it is. You're really only paying 6k a month for a couple months to see if this experiment works out. You're investing 20,000. You don't have $20,000 to do sales. Then don't do sales if you can't find $20,000. So people freak out too much about this top line number, this, this, this base and bonus the on target earnings ote and they're not more practical about what am I committing to cash upfront. Two, you need a plan where it's a win win So.