Welcome to Decoding Sales.

In this episode, we're going to unravel the mysteries of sales

something that I as an engineer know almost nothing about to unravel the mysteries of sales compensation,

something that I, as an engineer,

know almost nothing about, except that there is usually a concept

of a commission, and it seems like it's really important

because otherwise your sales people don't do a good job.

So in this episode, Peter is going to pull back the curtain

and help all of us understand how sales compensation actually works.

Peter, let's start with the basics. How is a sales compensation plan laid out? What are the components?

Yeah, so usually there is a base component, so that's what you're guaranteed as a salesperson.

Salespeople are risk loving I would say for the most part, but there still needs to be a minimum amount of take-home cash that is guaranteed.

So that's what's called the base component. And then there's a bonus component.

Typically, if you're in a mature sales organization, the bonus component or the variable component,

which isn't guaranteed, but is based off of whether or not you hit your quota or revenue goals

That tends to be around half of your overall total compensation so you know you hear this term OTE thrown around quite a bit and OTE stands for overall total earnings.

So overall total compensation and OTE is a mixture of that base as well as that bonus.

Now the last part, especially for tech companies where sales folks are now starting to really

you know value this third component is equity.

So having skin in the game for a tech startup can be rewarding,

especially if that company does well.

But of course, depending on when you join you need to

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