Welcome to Module 5 of the Stage 2 Capital Catalyst Curriculum! This time, we’re focusing on a topic that every scaling company eventually wrestles with: designing effective GTM compensation plans. These plans aren’t just about paying your team, they’re one of the most powerful tools in your toolbox to drive alignment and achieve your goals.
Leading this session was Liz Christo, Partner at Stage 2 Capital, with insights from Catalyst LP, Graham Collins of QuotaPath. Together, they walked through how startups can structure compensation plans that incentivize the right behaviors while avoiding common mistakes.
"Sales reps do what you pay them to do," Liz explained. "If your plan is misaligned, they’ll still optimize for their incentives, it’s up to you to design plans that drive the right outcomes." Sales compensation isn’t just about paying people; it’s a tool to shape behavior and align your team with company goals. To get it right, Liz and Graham shared four principles every effective comp plan should follow.
Before diving into the specifics of comp plan design, Liz outlined some core principles to keep in mind as you build your plan:
A great GTM comp plan boils down to three questions:
When it comes to the “how,” there are a few ways to structure payout timing. Watch below as Liz walks us through four common approaches, breaking down the pros and cons of each.
For early-stage startups, Collections tends to work best. It keeps cash flow steady and ensures deals are secure before commissions go out. As things stabilize and you get a better handle on receivables, moving to Billings can create a nice balance between motivating your team and managing the company’s cash. Once you’re in a stronger financial position, Bookings can be a great way to directly link reps’ efforts to their rewards, keeping them engaged and driven.
Liz also pointed out that performance-based payouts can be useful for companies struggling with onboarding or retention. Tying commissions to customer success milestones, like activation or hitting an "aha" moment, keeps alignment between sales incentives and long-term customer outcomes.
Finally, a hybrid approach, (splitting commissions between bookings and collections), can reduce risk while still keeping reps motivated.
Even with the best intentions, many founders fall into these common traps:
Copy-Pasting from Past Companies:
Founders often default to comp plans they’ve seen at larger organizations, only to find that those structures don’t fit the unique needs of a startup. "Context matters," Liz explained. "You need a plan that matches your business goals and the stage you're at today."
Over-Complicating the Plan:
Simple plans drive clarity and performance. Reps need to know exactly how they’ll get paid. Liz emphasized limiting comp plans to 1–3 key metrics tied directly to outcomes, ensuring salespeople focus on what truly matters.
Ignoring Retention and Upsell:
Focusing exclusively on new business can create a "throw it over the wall" mentality. Liz encouraged tying compensation to retention and upsell metrics, particularly in subscription-based models, to ensure long-term value creation.
Your sales compensation plan should reflect your company’s stage and strategy. Liz shared three common scenarios startups face and how to design comp plans accordingly:
Once you’ve nailed down the basics of your comp plan, it’s time to think about how to scale it. That’s where tools like accelerators and decelerators come in, they’re key to rewarding top performers and addressing underperformance without disrupting the team dynamic.
Liz shared a simple example:
This structure ensures fairness while incentivizing high achievers, making it a valuable tool for startups looking to scale.
Sales isn’t the only function that benefits from variable compensation. Liz explained how startups can extend these principles to other go-to-market roles:
As your team grows, expanding variable pay structures can drive alignment across functions.
Sales compensation plans are never static. They should evolve as your business grows. Liz summed it up perfectly.
"Compensation is about aligning your team’s success with your company’s success. Start simple, track outcomes, and iterate as you scale."
If you’re designing your first plan, start by testing it against historical data, and don’t hesitate to seek input from trusted advisors. A strong comp plan is the foundation of a motivated, high-performing team.
In the next Catalyst Module 6, we’ll explore systems for repeatable lead generation and pipeline development.
Stay tuned!
P.S. Want More Advice from Liz?
Be sure to sign up for Dear Stage 2, her weekly newsletter that answers top founder questions. It’s packed with tactical advice and lands in your inbox every Saturday morning.