YouTube Video 9-17-25
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[00:00:00] If you wanna reach the next level of growth in your agency, you need to escape doing all the sales yourself. You need to hire a salesperson. However, when I meet agency owners who know they need to hire, it becomes overwhelming to know how to approach it, which is why I created a Proven to Work five-part sales compensation playbook for agency owners.
It's designed to balance motivation. Performance and long-term client retention before getting into the compensation plan. There are a few core principles I coach agency owners to think about when structuring compensation. Core principle number one, reward results, not just effort. Compensation should incentivize closing deals.
While ensuring a livable base while keeping salespeople hungry for success. Core principle number two, aligned with the agency's goals, prioritize [00:01:00] reoccurring revenue and client retention over one-off wins core principle number three. Simplify to scale. Create a clear compensation system that's easy for your salespeople to understand, or else you'll see their performance suffer.
Now, before we jump into the five part compensation plan, I've created a sales compensation playbook for agency owners. You can get a free copy right now by commenting the word playbook in the comments, and I'll happily send it right over to you. Okay. Let's get into the five part compensation plan. The first part is on target earnings.
The definition is that this is the total annual compensation your salesperson earns. When they hit 100% of their sales quota, essentially it's their base salary plus commission. The structure of it is 50% base salary, 50% commission. So why do it this way? [00:02:00] It balances security with performance driven earnings.
Which is very common in agency sales rules. I'll give you an example. Let's say you have a sales representative making $60,000 a year or $5,000 a month in base salary. Commission at 100% quota is also $60,000 a year or $5,000 a month on target earnings, 60 k plus 60 K is $120,000 a year. Now, of course, you wanna adjust your on target earnings based on your market.
It could be somewhere between 80 K or 150 K based on your local market. The second part is sales quota. This is the monthly reoccurring revenue a salesperson is expected to close. Once fully trained, an agency benchmark is somewhere between 10,000 and $20,000 a month in monthly reoccurring revenue close.
For example, closing maybe [00:03:00] five to 10 clients, somewhere between $2,000 and $5,000 in monthly reoccurring revenue. Of course, don't just take those numbers as your own. You want to customize this. Based on your average revenue per deal and sales cycles, the purpose of the quota is that it ties directly to your salesperson's commission and it gives them a clear target by which they are measured against.
The third part is commission structure. What I recommend my clients do is to pay your salespeople 5% of monthly reoccurring revenue. For the first 12 months per client, then pay them 1% of monthly reoccurring revenue for months 13 through 24, and then zero after 24 months. So why do it this way? It encourages salespeople to close.
High quality long-term clients, which of course is absolutely critical for agency stability, while also discouraging from [00:04:00] focusing on clients that churn quickly. Here's an example. At full quota, let's say they're expected to close $20,000 a month in monthly reoccurring revenue, multiply that times the 5% commission, and they're gonna make a thousand dollars a month.
Every month from those deals in that month. If you look at the annual commission from those deals, in that one month, they're gonna make a thousand dollars times 12, which is $12,000. Of course, this scales up as they stack up their clients. Their commission grows over time. The fourth part is ramp period.
This is the time it takes a new salesperson to hit full quota productivity. When you hire a new salesperson, you can't expect them to start closing deals on day one. Instead, expect anywhere from four to six months until they are fully ramped and hitting quota. For example, in month one, they're probably not gonna close any deals.
In month two, maybe they'll close a deal, maybe two. In month three, maybe it's three to four deals, and then month five or six. They're [00:05:00] at full quota. So what's their compensation during this ramp? Well, they're probably just getting base salary only, and the commission will start hitting their paychecks once they start closing some deals.
Now you can always offer a new salesperson a signing bonus, couple thousand dollars, $5,000. To ease the transition and to attract great talent. And finally, part number five is bonuses and incentives. It is extremely important to have quota achievement bonuses when your salesperson hits 100% of their annual quota.
You gotta give 'em a great bonus. For example, if your seller's annual quota is $240,000 in monthly recurring revenue, give them a great $15,000 one-time bonus. And if they exceed 120% of their annual quota, give them a $25,000 one-time. They deserved it. So why do this? You're rewarding, consistency and overachievement boosting [00:06:00] morale and retention from a timing perspective, this is typically paid out annually, but it can be paid out quarterly.
Okay? Here's how it works in practice. Month one, the sales person earns their base salary $5,000 a month. And they're focusing on training, no quota pressure. By month six, they're fully ramped. They're expected to close $20,000 in monthly reoccurring revenue where they get their $5,000 base and a $1,000 commission, which is $6,000 a month.
If we look at the full year on target earnings, we're looking at a $60,000 base. And a $60,000 plus in commission, which equals to $120,000. And that doesn't include bonuses, and it also assumes that they're fully ramped up. Now. Year two, their commission stacks as they retain clients potentially earning greater OTE with bonuses.
Now, why does this work with digital marketing agencies? Number one, it [00:07:00] focuses on recurring revenue. The 5% to 1% commission structure incentivizes salespeople to prioritize retainers over one-off projects. Aligning with the agency's economics. Number two is motivation. High on target. Earnings of a hundred K to 150 K with bonuses attracts performance driven talent who thrive on commission, not just base pay.
Now, if you like me, you know that salespeople love earning money and they are money motivated. So we wanna put a really big incentive in front of them, and this commission structure does just that. Oh, and by the way. Don't put a cap on their earning potential. If they keep selling deals, keep paying their commission checks, they'll keep going.
Now, as I mentioned earlier, I have created a sales compensation playbook for agency owners. You can get a free copy right now by commenting the word playbook in the comments, [00:08:00] and I'll send it right over to you. At Scorpion, we scale from 20 million to 200 million because we deeply specialized first in the legal vertical.
And then others. Click the video on the screen right now to see how you can apply this same strategy to your agency.
