Compensation for Business Development

The stage of your company should determine what type of BD you hire. Early stage companies need to find a business person that can drive feedback to the product and engineering team, identify paths to market and outline assumptions to test with the first few deals. My earlier posts walk through the three stages for go to market.

So, how do you to compensate a BD person? Start with establishing what is the desired outcome. What do you want from the conversations, deals the BD person will drive?

Customer feedback / market validation

What features are most valuable

Testing pricing models

Identifying verticals

Path to market

Going to a heavy variable component too early creates tension because it incentivizes the wrong behavior. The BD person wants (or needs) to hit certain targets to achieve their target and get paid. If feedback and data are more important than revenue (often the case in the early stage) you want to align the incentives accordingly.

In the early stages, I recommend a high base or straight salary. If you are still working on product to market fit, testing revenue models and other business model basics, pay a straight salary. If you are set on having a variable component, I recommend it is less than 20% of total compensation.

Once you have product to market fit and a clear pricing model you can bring on a sales team and have a split closer to 50% base 50% variable or 60% base and 40% variable because driving revenue is the primary focus. Sell more, make more.

Last tip, this is something to discuss with the BD person before they join your company.

Learn more http://www.ericgrafstrom.com/

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