Designing a CRO Comp Plan

CROs are expensive hires. Designing your compensation plan, before opening headcount, will help you recruit a great revenue leader.

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CRO Compensation

Revenue leaders are typically the highest-paid executives in the company. They are the drivers of growth, and great sales leaders command competitive compensation. But compensation is complex. Oftentimes, CEOs—especially first-time CEOs or those who grew up on the technical side of the house—are challenged with how to create a compensation plan that is commensurate with the marketplace, delivers on company goals, and is aligned with their financial plan.

There are several factors to consider, both from the candidate’s perspective and the hiring leader’s perspective, when designing compensation. One size does not fit all. To recruit a top-performing revenue leader, you need to thread the needle by carefully weighing multiple inputs.

Compensation Inputs:

• Company stage and type (public, private, VC-backed, PE backed)

• Candidate tenure and track record

• Market rate and competitive benchmarks

• Short-term and long-term business goals

• Available cash and equity pool

• Alignment with investor expectations

• Incentive structures (commissions, bonuses, accelerators, LTIPs)

Venture-backed companies struggle more than established businesses due to the executive team’s lack of experience designing compensation plans. When it comes to hiring a company’s first CRO, the expense and inputs can be overwhelming.

Compensation Considerations:

Budget

Money in earlier-stage companies is typically tight. Too often, I see startup CEOs believing the revenue leader will unlock unprecedented growth in record time, creating a budget that risks toppling the company over. Before launching a search, you must know your compensation budget and then be realistic about what you can truly afford. Remember that a revenue leader can only control so much. Product, competition, marketing, and many other factors lead to a company’s success. Sales is only the tip of the spear. Be smart about where you are and what a revenue leader can deliver.

Talent

The more competitive the budget, the more likely you are to secure top talent. But the budget you set may not always align with your desired talent level at your company’s current stage. There are amazing “up-and-comers” out there, but you need to understand the trade-offs—both positive and negative—when hiring a first-time revenue leader. These candidates need training, mentorship, your time, and substantial support to succeed.

Goal Setting

Commissions—and equity outcomes—are always tied to revenue attainment. Setting realistic goals, rather than overly ambitious “dream goals,” creates an environment where everyone can win. Lofty goals that are unrealistic based on market conditions, product readiness, competitive landscape, or other critical factors, will only result in burning significant cash on a revenue leader who will quickly depart the company.

Common Pitfalls:

Not Knowing Benchmarks

One of the most common mistakes I see early-stage CEOs make is either significantly overpaying—putting precious runway at risk—or dramatically underpaying, preventing them from attracting the talent required to hit their growth milestones. Compensation benchmarks for businesses vary, depending on the sector and stage. Your recruiter will give you accurate data, as should your investors. You can also find resources on the web but a recruiter will have the most accurate, real-time, marketplace data.

Ignoring Equity Dilution and Future Rounds

Founders frequently give away too much equity early, leaving little room for future hires, frustrating investors, and then having to get cheap later. Develop a multi-year equity strategy, that includes planned executive hires, that aligns with your company’s goals, timelines and future fundraising needs.

Key Decisions:

Paying Commission at $1 or Creating Thresholds

Both choices have benefits. Paying commissions from dollar $1 gives your leader immediate satisfaction in earning commissions quickly. Creating thresholds pushes them harder toward critical company goals. Typically, early-stage companies (Seed–Series B) benefit from commissions starting at $1. Later-stage companies with, proven track records, can confidently insert thresholds.

Caps on Commissions

There’s an ongoing debate around capping commissions. While it may make sense in a volatile market—where one big deal could disproportionately tip your P&L—capping commissions too early can backfire, limiting the exact behaviors you want from your revenue leader. Revenue leaders thrive on outcomes. If you want outstanding performance, restricting upside sends the wrong message. Instead, consider structured accelerators or performance-driven multipliers. These protect the business while still rewarding your highest performers.

Topline Revenue vs. EBITDA Targets

Many comp plans still measure success solely on closed revenue, but “growth at all costs” works only for a select few companies. Most need to move toward profitability to achieve a successful exit. If EBITDA growth is a priority, or if you're feeling margin pressure from product expansion, then a comp plan focused purely on topline revenue will drive the wrong behaviors. Tie part of your revenue leader’s compensation to margin achievement, profitability milestones, or specific unit economics targets.

Setting Goals with Buffers

Another common oversight I see all the time is the way quotas roll up across the org. A CRO’s quota should never simply equal the sum total of their team’s individual goals. Instead, the team's combined goals should roll up to more than what the CRO owns. Due to underperforming reps, deals that slip, unexpected turnover, and market volatility you need to have some cushion. Building in this buffer ensures the CRO remains accountable for the whole system, can effectively coach and support the team, and still will be motivated to hit an achievable number.

Incentivizing the Entire Revenue Ecosystem

Your revenue ecosystem is deeply interconnected: sales and marketing have merged, customer success relies on constant feedback loops, and customer retention is critical for long-term business success. Comp plans that reinforce organizational silos inevitably cause misalignment. Layering in a strategic bonus structure, and rewarding shared KPIs, ensures leadership teams collaborate and collectively drive toward the same goals.

CRO Compensation Drives Revenue Delivery

Ultimately, how you compensate your revenue leader communicates exactly the goals your company needs to achieve. A compensation plan needs to account for short and long-term growth, being realistic about where the business is today, and leaves room to make additional c-suite hires, considering future equity grants and fundraising needs.

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