Phone Works VP Sales Compensation Report – Q4 2007

Every year in the fourth quarter, Phone Works conducts a compensation survey of “Chief Sales Officers” of business-to-business technology companies. The majority of these businesses are based in the San Francisco Bay Area. Survey respondents include employees of both private and public companies. The size of the participating organizations varies greatly, with annual revenues ranging from the $1-10M range to over $1 billion. The average total number of employees is 972 and ranges from 11 – 19,000 and 11% of the respondents are from public companies.

Total Compensation Varies By Seniority

Table 1, below, displays the average base salary, commission, total package and range in company product sales price for sales executives in both public and privately-held companies. The 2007 total compensation package figures are 6% higher than in 2006.

	BASE SALARY	COMMISSION	TOTAL PACKAGE	RANGE OF SALES PRICE
All Respondents	Avg: $186K Range: $65K–300K	Avg: $150K Range: $25K–300K	Avg: $352K Range: $134K–669K	Range: $270–10M
SVPs/EVPs only	Avg: $224K Range: $150K–300K	Avg: $179K Range: $0–300K	Avg: $446K Range: $300K–669K	Range: $1K–10M
VPs only	Avg: $175K Range: $75K–300K	Avg: $141K Range: $25K–300K	Avg: $327K Range: $134K–669K	Range: $270–5M

Table 1. Average compensation and compensation ranges.

Bonuses and Stock Compensation are Important Motivators

In addition to commission, some executives receive additional bonuses of either cash or stock for:

• meeting sales goals
• meeting profit targets
• achieving key corporate objectives
• equity in the company

Stock and stock option grants remain a strong component of executive compensation. The industry average stock grants ranged from less than one percent to four percent of the company. Table 2, below, shows the average stock and stock option compensation for sales executives in both public and privately held companies.

Table 2. Stock and stock option compensation.

The number of options ranged from 0 to 1,320,000 with an average of 467,681. In public companies, the average was 478,000 vs. 450,831 in pre-IPO companies. Vesting periods are typically over four years (90% of respondents). 83 percent of the companies we surveyed provide full or partial vesting upon change of control of the company.

Sales Quotas and Number of Direct Reports

Table 3, below, shows the average annual quota, number of direct reports and size of sales staff. The annual quota figures have increased significantly since 2006.

	ANNUAL QUOTA	NUMBER OF DIRECT REPORTS	SIZE OF SALES STAFF
All Respondents	Avg: $57M Range: $1M - 900M	Avg: 16 Range: 2 - 300	Avg: 131 Range: 3 – 3,500
SVPs/EVPs only	Avg: $93M Range: $10M - 525M	Avg: 12 Range: 5 - 45	Avg: 130 Range: 6 – 700
VPs only	Avg: $49M Range: $1M - 900M	Avg: 17 Range: 2 - 300	Avg: 134 Range: 3 – 3,500

Table 3. Sales quotas and organizations

Just over sixty percent of the sales executives surveyed have worldwide responsibility while 23% have North American territories only.

Hosted Application Selling

With the prevalence of selling Software as a Service, we included survey questions specific to this sales model.

Here are the data for average base salary, commission, total package and average sales price of company products for sales executives in companies that sell Software as a Service:

BASE SALARY	COMMISSION	TOTAL PACKAGE	RANGE OF SALES PRICE
Avg: $175K Range: $65K-270K	Avg: $133K Range: $-250K	Avg: $321K Range: $120K-669K	Range: $270 - 10M

Table 4. Compensation Averages for companies selling SaaS

Quotas and average deal size have a different implication when subscriptions are involved. Of the 51% of surveyed companies that sell Software as a Service, quotas are most likely to be based on annual subscriptions.

Tenure of the Vice President of Sales

There is a fair amount of turn-over for this position. Thirty-six percent of executives have been with their company for less than a year, and 17% have been there longer than 4 years.

Table 5. How long have you been VP of Sales at this company?

Multiple Sales Channels Help Make Quota

Field Sales channels are the most common, however there are many different channels used including Resellers, Telesales and VARs. The number of respondents that have Telesales channels increased substantially in 2007 (up to 68% from 41% in 2006).

Table 6. Sales channels

The number of companies that have a Sales Development or Telesales groups increased substantially in 2007 (Sales Development up to 82% from 68% in 2006 and Telesales up to 69% from 41% in 2006).

Functional Responsibilities

In addition to overseeing the generation of revenue, the Vice President of Sales is often responsible for a host of additional functional areas. The additional responsibilities include Inside Sales/Service Sales, Marketing/Field Marketing, and Sales Consulting.

Here’s how it breaks down:

Table 7. Functional responsibilities

Compensation Plan Challenges

When asked, “What is the top challenge of your compensation plan?” there were more challenges reported for private companies than public companies. The most common issues reported for private companies were:

• Plans are not aligned to realistic goals.
• Compensation is impacted by non-sales issues.
• Plans do not drive and adequately reward top performance.
• Early stage (private) company resources and funds are constrained.
• Quota levels are not set appropriately.
• Quarterly incentives do not exist.
• Historical data are lacking to help establish targets/monitor performance.
• Growth plans are too aggressive while managing to a tight expense line.
• Experienced sales representatives are difficult to keep.
• Accelerators for over achievement are not in place.
• Commission payments are matched to customer payments over long implementation cycles.

In Public companies the most common issues reported were related to:

• Accurately and timely reporting.
• Revenue recognition challenges.

About the Surveyed Companies

The following graphics show an overall picture of the companies that responded to our survey.

Table 8. Categories of products sold

The “Other” category includes Software and Internet-based services.

Table 9. Headquarters location

Table 10. Stage of company

Help Us Improve Future Surveys

We’d like to hear your suggestions or questions on the information reported here; Are there survey questions you would like to see included? Clarifications on data reported? Other ideas on how to make the survey more useful. Send an email to info@phoneworks.com and let us know what you think.

This report is provided as a complimentary service from Phone Works, LLC, the San Francisco Bay Area’s leading inside sales consulting firm. Phone Works has helped over 250 clients design and implement sales strategies by building or improving inside sales groups via predictable, measurable sales processes that deliver optimized productivity, accelerated results and increased revenues.