Ultimate Guide to Pre-Sales Compensation

We have a problem, and it’s a big one too. We don’t talk openly about compensation enough. I mean why would we? Money isn’t openly discussed in many homes, especially with kids. Sharing how much you make immediately makes people squirm and get uncomfortable. And most importantly, knowing what others on your team or in management make can create tension all because someone negotiated a better deal.

But we have to stop this type of thinking. It’s time we start normalizing the conversation around compensation and ensuring that we help set each other up for success. Additionally, we can help make compensation equal and fair for everyone the more we talk about it together. So let’s start this journey by exploring the different areas of compensation when it comes to being in a pre-sales role.

It Starts with Having the Right Mindset

Before we dive into dollars and cents, it’s important to know exactly what you need (vs what you want). If you haven’t done this already, here is a quick exercise for you:

• Open up a spreadsheet and list out all of the fixed costs you have each month
• Next make an entry for monthly living expenses
• Another entry for those monthly emergencies and incidentals that always creep up
• And finally an entry for something towards your savings account

Got your total monthly figure? Excellent. Multiple it by 12 and you now have a baseline for the minimum salary you need per year.

Tip: There are few certainties in life other than death and taxes. Don’t forget that the minimum salary you just calculated is a post-tax figure. You’ll need to adjust that number up based on your specific tax situation.

Defining Your Worth

Whether you are just starting out or are a seasoned pre-sales professional, knowing your worth is the next step in setting up the right mindset. This can be loosely defined as your unique set of skills, plus your experience, plus the impact you can make (both within the role and the organization). Once you put a value to that equation, you’ll have a better idea of what you can ask for in terms of compensation because you’ll know how quickly you can deliver a positive ROI.

However keep in mind that you also have to balance this against external factors as well. For example, the macroeconomics of the market as a whole, the expansion or contraction of particular industries, and the amount of available talent on the market at a given time are all external factors that impact what you can reasonably ask for (in terms of compensation). This isn’t to say that you should compromise on how you define your worth, but you should take it into consideration.

Optimize for an Outcome

Another piece to consider is optimizing your compensation in relation to a specific outcome. For example, perhaps you are just getting started in your career. Your specific outcome would be “gaining experience”; whether in the role, the industry, or both. While you don’t want to go below the minimum salary you defined earlier, you might consider taking a lower paying role if it will net you the experience you are after. You can then later use this experience to negotiate a substantial raise or much higher pay in your next role.

The opposite could also be true though. Let’s say you are at a very senior level in your career and your outcome is “not having to worry about benefits”. You could actually achieve this in two different ways; a higher salary to offset high premiums not covered by the company or a lower salary with low to no premiums fully covered by the company. The point is, there will always be trade offs, but knowing what you are optimizing for will help you to stay focused in your consideration of any compensation package as a whole.

Write Out Your Response

By now you should have a clear understanding of the minimum salary you need, the range you’d like to aim for, and what your specific outcome is. The final step is to write out the response you are going to use in the awkward game of “who brings up compensation first” when talking to recruiters and hiring managers. There are dozens of different strategies out there that you can use to navigate the waters on this topic, but knowing how to address the question clearly when the time comes will help you avoid any mis-steps.

We will talk about the difference between base salary and On Target Earnings (OTE) in the next section. For now, here are three starter templates that you can begin to make your own:

Compensation Not Listed - “I’m currently looking for a base salary between $XX and $YY with an OTE around $ZZ. This is based upon my current experience within the industry, the skill sets that I bring to the table, and the impact that I can have in this role within XX timeframe. Is that inline with the compensation range for this role?”

Tip: Always use a range so as not to box yourself into a corner. Once you state your range, back it up with hard evidence to justify (your worth). Finally, confirm that the range is acceptable so the conversation can proceed forward.

Compensation Listed (Clear) - “I noticed in the job posting that the compensation range was listed between $XX and $YY. Can you provide the breakdown of base salary vs OTE? Additionally, I would like to confirm that the range listed is still applicable for this role.”

Compensation Listed (Unclear) - “I noticed in the job posting that the compensation range for this role is very broad. I’m currently looking for a base salary between $XX and $YY with an OTE around $ZZ. This is based upon my current experience within the industry, the skill sets that I bring to the table, and the impact that I can have in this role within XX timeframe. Can you confirm this is inline with the compensation range for this role?”

Tip: With the new pay transparency laws, some organizations are trying to skirt the rules by listing huge ranges for a given role (e.g. $50,000 - $300,000 per year). If the range is unreasonable or too wide, this would be considered “unclear”.

If you’ve made it this far, you should have a clear mindset when it comes to talking about compensation. Knowing what your goals are and how to approach the conversation with hiring teams is half the battle. Now we can move on to specifics of how compensation is most commonly broken down within pre-sales.

Show Me the Money

Now it’s time to talk dollars and cents. While we’ve been mostly focused on base salary and what you need to survive, sales is a lot more nuanced than that. This is both a blessing (you can make really good money) and a curse (your money could slip away before you even get started). So let’s start by looking at how most compensation plans work.

Tip: The following breakdown is based on experience and feedback from others in a pre-sales role. Your mileage will vary by company and industry. This information is meant to provide a starting point only.

Unlike other members of the sales team (e.g. Account Executive), pre-sales often comes with a higher base. This is often 70% - 80% of your total (cash) compensation. The remaining 20% - 30% is your bonus which is usually paid out quarterly. The full formula looks like this:

On Target Earnings (OTE) = Base Salary + Annual Bonus

Remember I said sales is full of nuances? Well here is your first one. When talking about compensation, your bonus is presented as an annual amount (which makes sense because the company is talking about total compensation). However when you get to the actual offer, your bonus is actually split equally across each quarter of the fiscal year. So while you get your base salary consistently each month, your bonus is much dependent on several factors each and every quarter.

Now here is where you need to be careful. Companies will often dangle a very large OTE number in front of you as a way to attract talent (this goes for the Account Executives too). The real question to ask though is around quota attainment, which leads us to nuance number two.

How will you be “paired up” in this pre-sales role? Some pre-sales resources are paired 1:1 with an Account Executive, some are 1:many, some are based on region, and some companies use a pooling model. How you are paired up can have a big impact on your ability to hit your revenue goals (which can directly impact your bonus). During the interview process, make sure that you ask solid questions around how you will be paired and how that team performed over the last few questions.

Tip: If the job sounds too good to be true, or the numbers aren’t adding up…perform more due diligence before accepting the role. When in doubt, reach out to others that already work for the company and (politely) ask them to confirm what you’ve been told.

And finally, let’s touch on nuance number three. So far we’ve been talking about the bonus part of your compensation as it relates to revenue generating activities. But there are actually two different types of bonuses commonly used in pre-sales land; revenue based bonuses and Management Based Objective (MBOs) bonuses. Let’s look a little deeper into the differences between the two.

Tip: Almost every company on the planet has a clause in their employment contract that forces you to forfeit your bonus if you quit, are fired, or laid off prior to the date of the bonus being paid out. If you ever plan to exit your pre-sales role, make sure you time it right (if possible).

Revenue Based Bonus

For the majority of those in a pre-sales role, you’ll find that your bonus is tied to how much business you close, also called revenue or quota attainment, within a given time period (usually a quarter). This makes it fairly easy to estimate what your bonus would look like at the end of the quarter. Let’s say you had a revenue target of $100k this quarter and you closed $80k in business. You achieved 80% of your quota, so your bonus would be 80% of the total amount you are eligible for this quarter. Not bad.

The challenge with revenue based bonuses though are the way in which they are calculated. If you work the deal alone, you get 100% of the revenue (credit)towards your quota. But what if you worked the deal with a peer? What if there was a partner involved? There are so many little intricacies of how revenue attainment works that it’s often hard to keep up, but during the interview process the hiring manager should be able to provide you with a general idea of how it works for this organization.

The final point on revenue based bonuses is around quota relief (not to be confused with quota attainment). Quota relief is when you get credit towards your “total quota” for a given quarter without the need to explicitly close a deal. Wait, what?! Why would any company agree to this?! Consider this, you’ve just been hired. It’s day one on the job and your manager says to you, “Welcome to the company. Your quota for your first quarter is $500k and we are already two weeks into the quarter. Good luck.”. Yikes! Anyone that has been in pre-sales before knows that it takes a minimum of 30 days to ramp up, but more realistically it’s closer to 90 days. That means your primary focus is on learning all the things, not closing deals. Conflict of interest? I’d say so.

So, now that you’ve seen a real world example of how you can get screwed, let’s consider a few other examples where quota relief would make sense:

• During your ramp up period (first quarter)
• You start in the middle of a quarter (your ramp period is now across two quarters)
• You go out on maternity or paternity leave
• You are in a hybrid role where 50% of your time is not pre-sales related
• You work for a super early stage company that doesn’t have consistent revenue yet

While each of these situations will have certain nuances to them, talk about them up front with the hiring manager and any executives that are involved with quota assignment for the sales organization. The last thing you want is to realize one of these situations applies to you after you’ve already taken the job.

MBO Based Bonus

We’ve been talking a lot about revenue based bonuses, but what about non-revenue generating activities? There will be plenty of times that you are assigned work in your pre-sales role that won’t have any impact on revenue generation. How then do organizations incentivize pre-sales teams to get these things done? Well money of course. But more specifically, setting MBOs and tying them to a part, or whole, of your bonus.

Some common MBO items include:

• Completion of a particular technical certification
• Completion of a training course
• Achieving a milestone in a particular product
• Producing a certain amount of content in a given time period
• Closing a certain number of new customer logos
• Delivering partner training in a given time period

Again, these are only some examples and your mileage may vary. Just make sure that you are clear when reviewing any offer that you understand what type of bonus structure is in place and how the bonus itself gets broken down. In some organizations you’ll also find that quarterly bonuses can be further split into smaller chunks across revenue generating activities and MBOs.

Red Flag: Unless you are very senior in your career or are comfortable managing up, be very careful accepting a role where the bonus is tied to MBOs or KPIs that will be defined in the future. If the company is mature, this is a sign of dysfunctional sales leadership. If it’s a startup (more common), this is probably just something they haven’t had to think through yet and are wanting to kick the problem down the road. It can present serious challenges once you are in the role if you don’t know what you are being measured against and you won’t have a leg to stand on to challenge bonus payouts.

Payout Windows

The final consideration when it comes to the bonus portion of your compensation is the payout window. For example, most organizations (regardless of size) take some time to process all of the deals in a quarter. You have to account for contract close dates, churn, chargebacks, etc. On average it takes about 30 days to reconcile everything and then tie that back to quota attainment. Additionally, for any MBO based portion of your bonus, your manager will need to submit documentation that you achieved what you were supposed to. Once the organization has the final numbers and documentation they will trigger a payout for your bonus in the next payroll cycle. When all is said and done, your bonus payout will arrive between 30 - 60 days from the close of the quarter.

Tip: If you are new to pre-sales, this staggered payment situation is why I always recommend ensuring you can survive on nothing but your base salary and treat your bonus as extra. You can’t control the payment dates and sometimes things happen.

Now here is the watch point; most organizations that have a sales team up and running will have this process figured out and payments will just flow. If you work at a startup however, or a highly dysfunctional organization, then it’s a different story. You’ll need to keep a super close eye on not only the payout window, but also the payment amount. There might be times where you need to chase down payments or ensure that they are calculated correctly. For some folks, this is all part of the startup life and they are probably used to it (myself included). For others, the instability and added stress this might cause can be a deal breaker.

Red Flag: Sales is complicated. Paying your people shouldn’t be. If there is an issue with a single bonus payment, don’t assume the worst and raise the issue right away. If this becomes a recurring theme…run like hell.

Beyond Money

Moving away from dollars and cents, there is another part of compensation that is often overlooked; benefits and perks! Yes we all love cold hard cash, but sometimes you have to zoom out and consider just how much money you are potentially saving through the benefits and perks being offered as well. In fact, many companies are getting so desperate for top talent in some industries (like cybersecurity) that they have started to get really creative in the benefits and perks that they offer! So let’s look at some examples of the things you might find being offered:

WFH Stipend - you can thank covid for this one! A rare perk to see in all but the largest tech companies just five years ago, this one is usually the lead off perk these days. You can often use this stipend for a laptop, home office furniture, and other technical gear to help you get the job done. Not a bad way to acquire a few new things on the company’s dime or refresh aging gear.

Unlimited PTO - this one has been making the rounds for quite some time, however it is being met with new levels of skepticism of late. Yes it’s nice to be able to take off when you need to, but in reality many employees don’t actually take enough vacation time! When you are doing your homework and asking around about your potential employer, this is another one to gut check on how many people actually take time off.

Healthcare - if you require healthcare coverage through your employer, make sure you get a list of plans and providers offered, full stop. Healthcare is one of the most expensive line items in the United States and employers know it. Make sure they aren’t passing along huge premiums for you to pick up the tab. While many employers do try to reduce the cost of healthcare for their employees (some are even fully covered 100%), dependents can also add significant costs too if you aren’t careful.

Dental - similar to healthcare, understand your premium costs vs what your employer is covering.

Vision - similar to healthcare, understand your premium costs vs what your employer is covering.

Basic Life Insurance - a pretty common benefit still, many employers tend to offer a basic life insurance policy. Depending on the company you might also find accidental death coverage as well.

Short-Term Disability Insurance - an often overlooked benefit because you don’t often realize the importance of it until you really need it. While it isn’t the top of the list for many, it should still be taken into consideration.

Long-Term Disability Insurance - similar to short-term disability insurance, you don’t often realize the importance of this benefit until you really need it. While it also isn’t the top of the list for many, it should still be taken into consideration.

401k Match - sadly a less common benefit these days, getting a 401k match from your employer is free money. Seriously, they are giving you free money to contribute to your retirement account (up to a certain amount). If you are in saving mode, this can be a really powerful benefit.

Mental Health Insurance - finally mental health is starting to become a normalized topic in the workplace. Many companies are also starting to provide specific insurance coverage for mental health services, above and beyond what standard healthcare covers (which isn’t always a lot). Additionally, app subscriptions like Headspace and Calm are covered to help folks rest and recharge mentally.

Paid Parental Leave - another very in demand benefit these days. Many employers are providing 12 - 16 weeks of full paid time off to ensure new parents are getting the time to disconnect from work and enjoy the new addition to their family. Even better news? Paid caregiver leave is starting to appear as well with the same benefits.

Cell Phone + Internet Stipend - if you haven’t checked your cell phone bill lately, the savings from this perk might really surprise you. It’s fairly common to get coverage up to $100 each on your cell phone and home internet…that’s $2,400 per year in savings to you. Not bad!

Professional Development - perhaps one of the most under-utilized perks, professional development funds can range from a few hundred to a few thousand dollars. If you plan ahead, you can get some serious learning done without spending a dime.

Pet Insurance - don’t laugh, but it’s a thing. While still an uncommon benefit, I’ve seen it more than once so it makes the list! Coverage will vary wildly.

Charitable Donation Matching - this is one I don’t think we see enough of and frankly I wished every company had. Again, matching amounts will vary wildly, but the fact that some companies are still willing to match at all makes it a win in my book.

Tip: Performing a quick analysis of the open job roles we track here, more than 85% of the postings don’t include a list of benefits or perks for the position. This is just dumb and antiquated to say the least so be sure to speak up and ask early what the full list of benefits and perks include.

Equity

There is one element of the compensation package that we didn’t talk about; equity. While you will often find this simple little word casually thrown in among the zillion other things listed in the job posting it is often one of the most complex topics when negotiating a compensation package. As such, I’ve decided to do a whole separate guide dedicated to equity (coming soon)! If you do receive an offer, I always advise to remove equity from the equation (initially) because there is too much you can’t answer right away. If the rest of the compensation package makes sense and you want to move forward, then come back to equity and evaluate it separately.

The Full Picture

Whew. This was a ton of material to cover, but hopefully you’ve stuck with me. The reason that compensation is such a difficult topic is because it’s a multi-variable problem. Base, bonus, benefits, perks, equity…it’s a lot to take in while also trying to get through multiple rounds of interviews at the same time.

My final piece of advice when evaluating any compensation package is to consider the game of chess. It isn’t about any single piece, the best strategy is to see the whole board. Cash is always important for us to survive, but make sure you evaluate the entirety of the package and see how each piece fits into the balance.