Compensate fairly

For less-experienced founders, sales compensation creates particular discomfort. You're asking someone to take an enormous risk—joining an unproven company with an immature product, no brand equity, and uncertain prospects—and you have to make it worth their while. But you also can't throw unlimited money at the problem. The stakes are high. Comp too low and you won't attract great salespeople. Incorrectly structure your comp and you risk driving the wrong behaviors. Make it too complex, and you'll create perverse incentives.

The good news? Early-stage sales comp is simpler than you think. You're not building a comp plan for when you’re a unicorn. You're building one for right now.

The core elements of comp

Every sales compensation package has three parts.

1. Base salary

This is what keeps the lights on for your sellers. For an early-stage Account Executive (AE) in a major tech hub, you're looking at $80K-$120K depending on experience and location. Use Carta's compensation data (or another data provider) to understand where you stand relative to the market. It's completely fine to be at the 50th percentile for base if you're offering strong equity. Don't try to compete on cash alone—you'll lose.

The split between base and variable commission typically ranges from 70/30 to 50/50. That means if you're offering a $200K OTE (On-Target Earnings), it might break down as:

• 70/30 split: $140K base + $60K commission (more security, less variable)
• 50/50 split: $100K base + $100K commission (higher risk, higher reward)

More senior hires or those in leadership positions tend toward 70/30. Individual contributors, especially at companies with less predictable revenue, often land at 50/50 or 60/40.

2. Variable commission

This is what drives the correct behavior. The key question: What behavior do you actually need driven? In the early days at Clarify, it wasn't revenue because it was too early to have sight of what that would look like quarter over quarter. Instead, we comped on customer acquisition with a retention period. If a customer signs a contract (whether it's $20 per month or $500) and they retain for the minimum period, commission gets paid.

Alternatives to revenue that might make more sense:

3. Equity

This is why a sales hire takes the risk. For early-stage roles, you might offer equity grants closer to the 80th–90th percentile of benchmark data to offset lower base pay or uncertain commission structures.

Your first seller could be anywhere from 70/30 (base/commission) to 50/50, depending on your business model and what you're asking them to do.

What this looks like in practice

First AE at early-stage B2B SaaS:

• Base: $100K
• Commission at quota: $100K
• Total OTE: $200K
• Split: 50/50
• Equity: 0.75%
• Comp trigger: Customer signs + retains 2 months
• Commission: $500 per retained customer (flat rate)
• Clawback: If customer churns within 2 months, commission is returned

You’re probably too early for annual plans

Tofu’s Elaine Zelby sets revenue targets on a monthly basis, not quarterly. "Humans are incentive-driven beings. If you create three little blips per quarter instead of one big one, you're gonna have a much higher win rate."

The monthly cadence has another benefit: It lets her adjust targets as the business evolves. "If we bumped up our ACV by $5K over the last two months and we now have a fully ramped second AE, here's the new goal." The business is changing too fast for annual plans.

Our approach at Clarify is similar: Each quarter, we agree with the sales team on the targets based on current reality. Are we still learning what resonates? Focus on call volume and qualification. Getting better at closing? Move to conversion metrics. Have enough signal on revenue? Shift compensation there. The plan evolves with the business.

Clawbacks keep everyone honest

A clawback is when you take commission back if a customer churns within a certain period. They are designed to prevent your team from closing deals with customers who were never going to succeed with your product. Standard structures are:

• 2-month clawback for monthly contracts
• 3-month clawback for annual deals

At annual contract sizes ($50K+), it's harder for a customer to get out anyway. The real risk is at lower annual contract values (ACVs), where bad-fit customers can churn quickly and impact your metrics. The clawback creates a disincentive against bringing in people who are too big, too small, or just not right for what you're building.

Recall.ai’s Amanda Zhu takes a different approach: They comp reps up to 12 months after the deal is closed, based on growth of the account. This creates ongoing alignment with customer success, not just the initial sale closure, keeping the rep involved and incentivized to help the customer expand.

"We haven't found an incentive structure that perfectly prevents closing bad deals,” says Amanda. “You select for the right people and occasionally dig into the deals they're actually closing to quality-check what's going on."

Don't manage through comp

Qwilr co-founder Mark Tanner's advice cuts through a lot of founder anxiety: "Don't build a comp plan that does the management for you. Just have a good faith thing that's relatively fair and then fire them if they don't work out."

Founders sometimes try to create punishment-based comp structures, where bad performance automatically solves itself. Make the commission hard enough to earn, and the problems go away, right? No, because you end up with a structure no good seller wants to work under.

"Don't structure comp in a way that no one good would want to work for you,” says Mark. "It costs money to live. Don’t be a jerk about it."

Build something fair and reasonable. Set achievable targets. Then, manage performance actively.

What not to do

Don't make it 100% commission
No good salesperson will take that risk. It costs money to live in places like San Francisco, New York, or London.

Don't comp on revenue if you can't forecast it
You'll either sandbag targets so badly that people hit them without trying, or set them so high that nobody can win. Either way, you're screwed.

Don't build annual plans pre-repeatability
The business is changing too fast. Build quarterly, adjust monthly.

Don't try to automate management
Build fair comp, then manage actively.

Good enough for now

You're not trying to create the perfect compensation structure. That doesn't exist. You're trying to create one that's fair enough to attract someone great, aligned enough to drive the right behaviors, and flexible enough to adjust as you learn.

At a minimum, you should know who your ICP is, how you handle pricing, and where you source the best leads. These are things you figure out through doing sales yourself.