Phone Works VP Sales Compensation Report - Q4 2005

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 California. All companies that responded to our survey this year have annual revenues less than $250M. The average total number of employees is 120 and ranges from 7 to 600. You can read more about our survey respondents in the last section of this article, “About the Surveyed Companies”.

Total Compensation Varies By Seniority

Table 1, below, displays the average base salary, commission, total package and average sales price of company products for the sales executives we surveyed.

	BASE SALARY	COMMISSION	TOTAL PACKAGE	AVERAGE SALES PRICE
Sr. or EVP	Avg: $213K Range: $144-295K	Avg: $184K Range: $170-250K	Avg: $397K Range: $162-500K	Avg: $175K Range: $1- 350K
VP	Avg: $164K Range: $100-210K	Avg: $113K Range: $0-235K	Avg: $302K Range: $125-550K	Avg: $144K Range: $1K – 1M

Table 1. Average compensation and compensation ranges.

This year’s respondents reported an average 10% increase in this year’s package over last year’s.

Bonuses and Stock Compensation are Important Motivators

In addition to commission, some executives receive additional bonuses for:

• performing over quota.
• achieving key corporate objectives.
• meeting bookings, expense, or profitability goals.
• impacting partner performance.
• penetrating target verticals or key accounts.
• retention, tenure, company value.

Most bonuses are in the form of cash, though one respondent reported receiving free vacations for over-achievement.

Stock and stock option grants remain a strong component of executive compensation. The industry average stock awards ranged from less than one percent to ten percent of the company. In public companies all Director, VP, and more senior-level executives held stock valued at less than one percent of the company. Table 2, below, shows the average stock and stock option compensation for all levels of executives in both public and privately held companies.

Table 2. Stock and stock option compensation.

The number of options ranged from 20,000 to 4,000,000 with an average of 597,000. In public companies, the range was 20,000 to 60,000 with an average of 47,000. Vesting periods are typically over four years; only 7% of respondents reported a three-year vesting period and 3% a five-year period. Seventy-eight 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 Increased

We saw a sizeable increase in quotas this year. Our survey respondents indicated an average 69% increase over their quotas last year. The number of employees reporting directly to the sales executive also increased dramatically, though the overall size of the sales staff went down. Table 3, below, shows the average annual quota, number of direct reports and size of sales staff.

	ANNUAL QUOTA	NUMBER OF DIRECT REPORTS	SIZE OF SALES STAFF
Sr. or EVP	Avg: $44M Range: $4-130M	Avg: 9 Range: 4 - 14	Avg: 45 Range: 5 - 80
VP	Avg: 23M Range: $2-120M	Avg: 13 Range: 4 - 65	Avg: 28 Range: 1 - 125

Table 3. Sales quotas and organizations.

Sixty-eight percent of the sales executives surveyed have worldwide responsibility while 29% have North American territories and 4% sell into the United States only. The average tenure of executives is two years. The maximum time a VP of Sales was in his or her position is five-and-one half years.

Multiple Sales Channels Help Make Quota

In addition to a primary channel of field sales, the majority of companies also has resellers and telesales.

Table 4. Sales channels.

About the Surveyed Companies

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

Table 5. Categories of products sold.

Table 6. Headquarters location.

Table 7. 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 newsletter is provided as a complimentary service from Phone Works, LLC, the San Francisco Bay Area’s leading sales consulting firm. Phone Works helps technology firms increase revenue, shorten sales cycles and implement successful, repeatable sales models by building better inside sales teams.

You can reach Phone Works at 510.749.9073.