How to Pay SDRs in Your MSP (Without Going Broke)

Speaker A: 00:00:37

All right, so you're hiring an sdr, bdr, inside, sales rep, whatever you want to call it, for your MSP to get more bookings, more appointments into your business.

What I'm going to do today is show you how to build a comp plan that's going to help you get more of the results that you want, meaning roi, and more appointments into the actual business and avoid all of the results that you don't, which is high turnover, wasted time, underperformance, and losing good people. Let's dive in. Hey, what's up?

I'm Ray Green, founder of MSP Sales Partners, and I've worked with hundreds of MSPs on how to start building that sales team. How do you start getting an sdr, bdr, whatever you want to call it. We.

We say BDR most of the time, but BDR means something different in your world than it does other people's world.

So whatever you want to call it, you want to get somebody in the door to start making the most of your marketing, start doing some outbound, start, you know, capturing all the stuff that's. That's coming in potentially, and get more appointments and more bookings on your calendar so you can get more sales.

And one question that comes up very, very consistently is, how do I pay them? What is the comp plan? What is the structure? What should I do in commission, salary, all of that jazz.

So what I'm going to do in this video is just break down ex how I think about it, walk you through a process, and then I'm going to share a template that you can actually use, plug in the numbers that you want, and build your comp plan. Let's dive in. All right, now, the big question is, why does this matter so much?

And the reality is, the comp plan that you have for your salesperson is probably the highest leverage decision that you can make when you're building your sales team, when you're hiring your salespeople, a really good comp plan is going to help you attract the right talent. If you don't have a good comp plan to begin with, you're not going to be able to attract the talent that you want.

Because normally I'd say the person that you hire the highest leverage decision. But the comp plan that you build and market out there to go attract those people into your business.

And make no mistake, it is very much like a sales process.

When you're recruiting talent, that comp plan is going to bring in the right people, okay, and give you the opportunity to Pick the right candidate for your business. The other thing about the comp plan is it's how you lead and manage your salesperson when you aren't around, right?

Like you can't and nor do you want to stand over their shoulder doing, you know, hey, you've got to do this and now you got to do this, and now you got to do this.

The comp plan is always there, and if you've designed it properly, it should make it abundantly clear what behaviors you want to incentivize, what behaviors you want them to do, what behaviors you don't want them to do. So it's a way of managing asynchronously. It's also how you help them get maximum performance.

If you put the right structure in place, that's going to be enough to get the right person kind of focused in and targeted on what they need to do to hit the highest goals that you can set. And then of course, your comp plan also incentivizes your, your, your team to do their absolute best, right?

Like if you get the right people on the team and then you give them the right incentives, they are going to proactively work to maximize their income. When they maximize their income, which we'll talk about, then we're also going to be maximizing your revenue, your income as well.

So it's a way of motivating your reps without you having to run, you know, silly contests and you know, constantly try to get the energy up and constantly try to get people to do their job. Just build the comp plan the right way in the first place. And then last and not least, it's also how you protect your bottom line.

Because if you're not building diligent about this and you don't do it intentionally, you don't think about it, it's actually really easy to end up with a scenario that is a lose win situation. Like the last thing you want is to have a scenario where your sales rep is doing really good and you're going, oh my God, I'm losing money.

Like, I'm losing my ass the more that they sell. So this is why it matters so much. There's basically three steps to building a good comp plan.

And we're going to walk through each of these steps and just dive in just a little bit deeper into each of these. The first one is we want to define what our on target earnings are going to be and you'll this a lot.

It's ote and OTE is basically what your rep is going to earn if they're hitting the goals that are realistic, right. It may not be the absolute shoot for the moon number, right?

Like if you're, if you're like way over target, like that's not the maximum that you can earn and it's not the guaranteed lowest amount. It is the on target earnings, right?

Like we have a set of goals and if you hit these goals and consistently, then based on the structure that we have, this is about where you're going to land. The OTE allows me as a rep to know, hey, you know what?

But like if I'm hitting those numbers, this is a realistic target that I should be able to attain on a consistent basis. And it's going to vary significantly, largely based on experience and geography, right?

So if I'm hiring my SDRS in Southern California or in the Bay area of California, we're going to have a vastly different OTE than we are if we're hiring in South Africa. And this is actually one of the decisions that goes into hiring an sdr. Are you going to hire in person or you're going to hire remote?

And then if you're going to hire remote, are you going to hire relatively local, are you going to hire regional, are you going to hire abroad? Those are all different decisions that are going to change your OTE pretty drastically.

There's not a right or wrong answer that's outside the scope of this video. What you need to know though is what are the on target earnings that you're going to have for your rep? Now how do I do that?

I use multiple reliable sources. So I'm oftentimes using a recruiter, especially if I'm hiring abroad, right?

Like if I'm hiring and I was recently in South Africa, I'm going to rely on boots on the ground, recruiters and sources there. And they have a pretty good sense of what the market is going to represent. So third parties, like recruiters can be a great resource.

You can go to third party websites, things like Glassdoor and there's other job sites that will give you a range. If you just Google, you know, pay range for SDRs. In my area, you usually get a pretty good sense of what the range is going to be.

And then of course you can use AI, right?

And this is a tool that I've, I've been using a lot lately is I go in and I look both at a high level, like you can just ask copilot or GPT, like hey, what's the range in this area? Or you can have it do some deep research, right? Like I use GPT in the South Africa market recently. And I said, hey, this is what we're trying to do.

Here's who we're trying to hire. This is the level of experience that we're looking at. This is what I think the ranges are based on some initial searches.

Can you tell me what the ranges are for highest performers, very experienced in the middle, and the average and what the bottom is?

There's plenty of resources for you to go out there and find what that range is, but you really want that data to be objective and you want it to be real because it's going to drastically affect your ability to get the right candidates in the door, which is going to affect, of course, your ability to get results. Now, the thing to keep in mind is once you have that range, where are you going to hire?

And I know some people that say, you know what, like I'm, I understand this range. I'm going to try to be economic about this and I'm going to try to, you know, keep it on the lower end.

I will tell you my preference is actually higher end of the curve. Like, when I understand what that range is going to be. I'm almost always building a comp plan to aim for the top talent in that market. Why?

Because I can do some simple math. The ROI on a really good SDR and the ROI on a mediocre SDR is not a little bit more.

It's oftentimes double or triple the level of performance that you're going to get. You're selling MSP services. Look at the lifetime value of one deal.

If this SDR can get me two or three more deals per quarter or per year, the impact that that's going to have on you in terms of revenue and your business long term pales in comparison. So you're talking basically peanuts when you get down to it in terms of like brass tax.

You compare the ltv, the lifetime value of your clients and the nominal amount to go from middle of the market to the top of the market on the talent that you're hiring. I want to lean towards the top of the market. And that's partly because of results, as I was mentioning.

It's also because you get better players, right? Like they require less maintenance, they require less management, they oftentimes have more experience. The onboarding is faster.

So not only is the probability of success higher, the speed to result is also faster. So that's my strong preference. All right, now the second thing we want to look at is we want to determine what the salary split is going to be.

Basically what is the amount that we're going to guarantee, like a salary versus what is going to be commission and incentive based. Now as a rule of thumb, I'm looking at 60 to 70% that's guaranteed, that's a salary 30 to 40% that's going to be incentivized or commission based.

And what I'm basically looking to do is ensure that this rep has enough to survive.

Like what I don't want is somebody that is not making enough that once they get in the door, it's like, it's desperation and it's, you know, commission breath and it's like it's a. It's just a bad look. And I've seen that sense of desperation just lead to not good results.

So I want enough for them to have the essentials taken care of, but not be able to get the stuff that they really want, like not hit the ote or not get the earnings that they truly want. I have personally found that this is the split that I want. Now I know some people that will do straight commission.

I know people that do other, other structures here. I'm just telling you rule of thumb. This is what I'm always starting with, is 60 to 70% in terms of salary in the guaranteed side, 30 to 40%.

And this structure, the split has served me very, very well over time. The incentive is what you need to thrive. Like that's what you really want to earn and that's how you're looking at the split.

So we're taking number from the ote, right? Like what that, what that on target amount was. We're saying 60 to 70% is going to be guaranteed. 30, 40% is going to be incentive based.

And that's going to be what we take into the next step. And we say, okay, how are we going to build this 30 to 40% based on the goals that we have?

So that's what we're going to do next here, which is a third step. We're going to set up what these incentives are and we're taking that amount, right? So let's say 70,000 as the OTE.

60 to 70% of that is going to be the guaranteed. All right, so we table that. That's, that's your salary. What is left?

We need to create an incentive structure with commissions and with goals in order to hit that ote. All right? And so that's the amount that we're basically working with in the goals that we're going to use.

Now the first thing we want to determine to make up that amount is what exactly do you want to incentivize? And the reason I ask this question is because it's very tempting when you're hiring an SDR to want to incentivize or commission the end deal, right?

Like the actual end result, the the sale of a new client. And what I want to look for is incentives where that SDR can actually influence and control that entire process.

And they can't control a lot of things that happen after they've set an appointment for you. They can't necessarily control how the discovery goes. They can't necessarily control what's in the network assessment if you do one.

They can't control how the AE or the salesperson is going to present and close that deal or do the follow up or overcome object. Those are all things that are outside of their control. Which is why I don't like incentivizing my SDRs based on the end result.

Yes, I get that it creates alignment, it gets everybody kind of focused and rowing in the same direction. But nothing is worse for a high performing SDR to be killing it.

Like be setting up appointments only to find out that the AE just is blowing it, right? Like I'm putting the ball on the tee, I'm setting up these good appointments, I talk to them, I'm even help getting them show up.

And none of these deals are closing and I'm not making money. That's not what high performers want. High performers want to know how can I make more money?

So we want to focus on the things that they actually control. And as an SDR you're probably thinking number of appointments sat because they can at least influence that pretty significantly.

It's going to be number of calls made, emails sent, like think what is the activity and what is the result that they can directly either control or dramatically influence, right? And then those are the things that you really want to incentivize.

If you want to add a spiff or you want to add something like a small kicker at the end that says, hey, and if we close a deal then you get an extra, you know something, then I think that's fine.

And in the template we have like a little section for that, I would just heavily, heavily emphasize the things that they need to do in order to get the results that you want. And keep in mind the whole reason of the comp plan is to change behavior.

So if the comp plan isn't changing a behavior in a salesperson, then it's useless. Like, it's completely meaningless if you're wasting money or they're leaving money on the table.

And if you can't work it backwards to an action that they can actually take or a behavior that they can actually do, then there's a misalignment. So once you've determined what you want to incentivize, now what we need to do is just create that incentive structure. Okay?

So starts with math right at the top. So it's, you know, let's say 70,000 is the OTE, and we're going to pay, you know, 60% base, right? We're going to guarantee.

That leaves us 40%, which is 28,000, if I've done the math right here. So 28,000. And we need to hit that incentive pool based on the goals and what we're incentivizing, which is the appointment stat.

Now, let's say that we want. Want, you know, let's say six to eight appointments per month. So let's say seven, right?

So we want seven appointments per month, and that's 84 appointments that are going to be booked throughout the year. So we've got 84 appointments that need to be booked throughout the year, and we've got about 28,000 in an incentive pool.

Now, you can do some simple math. We could say, hey, you know what? We could. We could set up a structure that says if you hit one to four appointments, it's going to pay this amount.

And if you hit five to six this amount, and, you know, seven to eight this amount, and nine and over, it's going to be a certain amount. Or you can do it really simply and you could just say, all right, my Target's, you know, 84 appointments. It's 28,000 in the incentive pool.

I can divide one by the other and say it's going to be, you know, a few hundred dollars per SAT appointment. My preference is a tiered structure, you know, that. That goes up. So if you set more appointments, you actually make more money. But I mean, you can.

You can do it however you want. But what you need to do at this point is to say, this is what we're incentivizing. This is the pool. This is the structure.

And you go and you create that.

Now, once you've created that, and we'll walk through an example in a second, then the next thing you look at, okay, this is what I think is going to happen. Let's model this thing out and let's test it, right? Let's see how this actually works in actual practice. How is this actually going to play out?

What happens if they, if they do half of what I think they're going to do? All right, what happens if they do double what I think they're going to do?

And just run those scenarios, put them in a spreadsheet, take the template that I'm going to give you here in a second and run those on your own. And just make sure that there's actual alignment, right? And make sure that the goals are realistic.

Make sure that the on targets are actually achievable and attainable for somebody. Make sure that all of this kind of pulls together and the math works out and that the economics work out for the business.

And if you've done that, you've set not only your SDR up for success, but you've set your business up for success. Okay, now let's walk through this with a spreadsheet real quick. First thing we're going to do is define the OTE, right?

So that's, we're going to put in 70,000 example I mentioned. Now really, please don't think that this is the amount, right? Like this is, it really depends on your market.

There are markets where this is going to be really low, low, and you're gonna, like, you're not gonna get the, you know, the talent that you want and there's gonna be markets that this is really high. So again, you know, go back to the framework here. Understand your market, determine what the OTE is going to be.

Let's say we're gonna do 70, 000 and we're gonna do a 60, 000 split. So that means we, we're gonna pay 42, 000 on, on salary and we need to fill approximately 28,000 in incentives. What's the goal that we have?

We want them to set, you know, let's say six to eight, eight appointments per, per month. So I'm going to plug in six and I'm gonna, I'm gonna keep that there. I feel like that's, that's really attainable. Very, very achievable.

You know, could even say, you know, if we want to say six to seven, but for the sake of argument, what I'll do is I'll say six. This is, you know, 18,000 of the 28 has been filled. Just if they're, if they're just hitting this number now if you want to.

And that's at 250 per appointment. Now here I would like just really emphasize this is SAT appointment because they can, they can influence this, right?

Like they can call beforehand, they can, the information that they get is confirmed. They can send things out so they can influence us. So at 8, that's going to be 24,000, right. At 6 it's going to be 18,000.

We can come back and adjust these numbers. You know, we can do a call bonus. You know, calling is certainly within their control.

Like if they're doing outbound calls, you could plug something else in here if you wanted to.

And so let's say, you know, I wanted to make 80 calls a day and you know, I'm going to say, you know, there's going to be a call incentive that if you hit X number of calls per month, you're going to earn $500. Because that we know is absolutely in your control, right?

Like, as long as we're unloading the leads, this is absolutely within your control even if you don't set appointments. So no reason you can't, can't earn that.

Now if we just leave that there and we don't have any closed deal bonus like I, like I talked about, then the total comp on this is going to be about 66,000 or about 4,000 under. So we could come back and say, you know, what if they hit seven? Well now we're, we're right at that mark, you know, give or give or take.

And if they hit eight, they're there. All right. So, you know, this is where, you know, you could say, you know, do I, do I want to, to pay more, you know, per appointment potentially?

You know, that's, that's one way to look at it. You could adjust this.

This could also be something where you say, you know what, what I am going to go ahead and offer, you know, a kicker, basically like a 250 bucks for every deal that closes or something like that. And if one closes per month, then, you know, the total comp is, you know, a thousand instead of four thousand.

If they hit that number, that seven number, they're over. If they hit that eight number, they're over here. But you can kind of toy with the numbers and back into it.

Now what I've got here is basically just a pretty simple ROI calculator. And it just takes the number of appointments that you have set that assumes that you're going to close. Let's say 33 is a very reasonable close rate.

2,500 MRR is very reasonable MRR and your retention. So the lifetime value of a client and then the value of the deals per year that are closing. You can do the math on this.

And this is why I say don't be greedy with the comp plan. We want to incentivize the sales.

And when you understand the real ROI of this, pretty significant right now what I have here on this one is same model, just slightly different in the sense that it has some tiers for the appointments that are set. So you can take the 70,000, you can take this, we've still got 42 and the incentive to fill and let's say 6.

And then instead of having one flat amount, we've got different tiers. So if you do 1 to 4, 5 to 6, 7 to 8 again you can adjust this and then play with the different numbers and it gets you to a different comp.

This is really my, my preference when, when putting plans together is, is to have a tiered model like this that allows people to really earn more. The, like the, the higher performers to, to really push.

And it does make a pretty significant difference, especially when they're performing really well. Right. Like you can you start to look at this and like, wow, like, all right, like we're really cranking things out.

You know, again you just kind of look at, you know, total ROI and the value being created per year. So this model, I'll share it. There's actually this is one of the tools that we have in the MSP sales toolbox.

And so I'll go ahead and put this in that toolbox. It's also we've got other resources like objection. Handling playbooks and sales meeting templates and frameworks and plenty of other resources.

So I'll go ahead and add this and you can just drop your email in that link below and you'll have access to the entire toolbox box absolutely free. And feel free to use this. You just need to, you know, go, you know, hit file and make a copy and make it yours.

So I hope that's helpful in, you know, thinking through how do you comp your sdr, setting them up with the right foundation, making sure that you create a win win environment so that when they, you know, are making good money and you know, they've got the resources that they need to succeed, that it comes back and aligns with your goals and what your objectives are. If you do have any questions, go ahead and drop them in the comments. I'll do my best to respond and this has been valuable.

Go ahead and subscribe to the channel or hop on my email list where I drop one sales related email per week. Until then, adios.