Your Sales Comp Plan Is Costing You Millions | Dan Pascone with Kyle Smith | Ep #20

Kyle Smith is Managing Partner and owner of The Bridge Group, a sales consulting firm that helps technology companies sell more. He says he got into the field by accident: he has a biology degree, planned to pursue an advanced degree in life sciences, then realized he was tired of being poor. A mentor, his aunt, suggested he try sales. He later joined The Bridge Group in 2014 on a whim and, by his account, has been there 11 years.

He describes his path to ownership this way: in 2018 he bought 4% of the firm after proposing an employee buyout with colleagues, and he took a controlling interest 2–3 years before the recording. [VERIFY: ownership details are the guest's]

Kyle says the firm's work includes strategic assessments (organizational design, headcount, roles, compensation and supporting technology), playbooks, training, coaching and some interim management. He says fewer than 5% of projects are retainer-based. Most have specific scopes and deliverables, from org design for a 3,500-person global sales organization to building a single outreach cadence for an inbound-only team.

The most common challenge, in his words, is the sales equivalent of technical debt: a structure that was hacked together at each stage of growth. The trigger is often an inflection point, such as a funding round, when a company needs to scale in a more deliberate way. He says buyers have shifted toward larger organizations, so he now works more with Chief Revenue Officers, VPs of Sales and VPs of Marketing than with CEOs of startups.

Kyle starts by comparing the numbers to market benchmarks, including the base and on-target earnings (OTE) split. Then he asks a behavioral question: does the incentive plan drive the behavior the company says it wants? His basics:

• Simple: Reps shouldn't need to keep their own spreadsheet to confirm they were credited and paid correctly. Kyle says that if the agreement runs 6 pages, something has gone wrong.
• Attainable: He says about 65% of reps should reach quota on any given team, and he checks that against historical data and benchmarks.
• In the rep's control: Pay should be tied to factors the rep influences, and attribution should be trackable so credit can be tied to results.

From the benchmarking data his firm collects, Kyle says the mix has drifted toward base pay for about 10 years. Account Executive (AE) plans that were long 50/50 are now about 55/45, and Sales Development Rep (SDR) plans moved from about 60/40 to about 67/33. [VERIFY: guest benchmarks] He gives 2 reasons. Recruiting was intense in the post-COVID tech boom, and heavy incentive pay with accelerators can create risk for finance teams when quotas are set without much historical data.

He says individual contributor plans are formulaic, while executive plans vary widely. A VP of Sales could be at $350,000 or $700,000 in total OTE, with a split closer to 50/50 and a stage-dependent slice of equity. These are Kyle's observations from his own work, not a standard to expect in your next offer.

Kyle says he's seen a shift in how leaders weigh equity. A decade ago, he says, many knew people who had been part of 8-figure exits and wanted to join them. Now, he says, many know people who took about $150,000 a year below their market value for equity that never materialized, in some cases more than once. He also points to dilution and lower multiples: roughly 13–14x revenue in the boom, versus about 6x now, with fewer acquisitions. [VERIFY: guest figures]

His takeaway is that fewer executives believe they're racing toward an easy $10 million exit from a slice of equity, so they want to be paid now for what they're worth. Dan said that matches what we see in our own work. Equity can still be valuable, but it's best viewed as potential upside rather than a promised outcome. Our equity compensation explainer goes deeper on how the different award types work.

Kyle comes from a family of entrepreneurs, including contractors and small business owners, and says money was always a topic and never felt like enough. He fell for sales quickly because he could see his effort tied directly to his income. Then came a common pattern: when he started making decent money, his first instinct was to spend it. He says he went through 5 cars in 5 years before buying a house and starting to save toward something meaningful.

For years, he says, his strategy was simply to make more money. That works early, when income grows quickly, but he notes the curve doesn't go on forever for most people. About 5 years before the recording, he shifted to a simple plan: he and his wife max out their 401(k)s, add at least $40,000 a year in after-tax investments, and put money into the business. He calls his wife's grad school an investment.

He says that in hindsight, he wouldn't have bought the cars, and that he and his wife now only make cash purchases of certified pre-owned cars and keep them until repair costs climb. In his experience, writing a $35,000 check changes how you decide compared with a monthly payment. That's his personal approach, not a recommendation, and financing can make sense in some situations. His next goal is saving a down payment for a short-term rental beach house in Maine.

• Coffee or tea: Coffee.
• Meal for the rest of your life: Pasta.
• Technology he can't live without: Zoom.
• Favorite quote: Angela Duckworth in Grit, which he recalls as "Excellence is achieved through monotony" (he says he may be misquoting).
• Books: He likes core principles in Dave Ramsey's Total Money Makeover (a not-an-endorsement mention) and names Disrupted as his favorite business book.
• Personal hack: He believes small decisions add up in $50 increments, not just in the $50,000 ones.
• Bucket list item accomplished: The Maldives.
• Financial milestone: A $5 million net worth.
• Advice to his younger self: Save money.
• How to connect: LinkedIn, where he says he does most of his communicating.

• Equity is a price you pay: Taking less cash for equity means you're pricing a risky, illiquid asset. Dilution, vesting and exit timing all change what the equity is worth, and it can end up worth nothing.

• Income growth eventually flattens: A strategy of earning more can carry you for years, but it needs a savings and investing plan behind it. Otherwise higher pay mostly funds higher spending.

• Small, repeated choices compound: Kyle's point about $50 decisions mirrors how we think about spending and saving together. Our post on the 70/20/10 rule shows one way to frame it.

This hypothetical is for illustration only. All figures are assumed, aren't projections or recommendations, and ignore taxes, vesting schedules and liquidation preferences.

Assume a sales executive in her late 40s is weighing 2 offers from private companies. Offer A pays $450,000 a year in total target cash, split 50/50 between base and variable pay (the variable part isn't guaranteed). Offer B pays $300,000 a year in cash plus 2% equity that vests over 4 years.

• The cash gap: $450,000 minus $300,000 is $150,000 a year, or $600,000 over 4 years before taxes.
• Dilution: If later funding rounds dilute her 2% by 25%, her effective stake is 1.5%.
• Break-even: $600,000 divided by 1.5% is a $40 million sale price just to make up the cash she gave up, before taxes.

If the company never sells, or sells for less, the equity may be worth less than the cash she gave up, and possibly nothing. Reasonable people can still choose Offer B for the upside, the role or the stage of their career. The point is to price the trade-off before accepting it. A CPA and an attorney can review the specific award terms and tax treatment.

Life-Driven Planning covers 6 phases: Cash Flow, Retirement & Hybrid Retirement, Risk, Expense & Goal, Tax and Legacy. Variable pay, bonus timing and savings rules live in the Cash Flow and Tax phases. Our Equity Compensation Playbook is a set of structured rules for RSUs, stock options (ISOs and NSOs), ESPPs, deferred compensation, AMT and 10b5-1 plans, so each award has a plan for when to hold, when to sell and how to handle taxes. Our 7-minute video on equity compensation is a quick overview.

Life Driven Investing (LDI) builds a portfolio backward from your life using the Four Liquidity Bands: 0–2 years, 3–5 years, 6–10 years and 10+ years. Variable pay makes the 0–2 year band especially important, because a strong commission year doesn't guarantee the next one. Private company equity or an ownership stake like Kyle's buyout sits in the 10+ year band, since it's illiquid and concentrated. Under our Quarterly Strategy Rhythm (ongoing plan updates, decision reviews and rebalancing), we revisit how that mix is holding up. This episode is educational and isn't an endorsement of The Bridge Group or any company or product discussed.

This episode is for sales and revenue leaders, senior executives and other corporate professionals in their 40s and 50s with $500k+ in household income, variable pay and possibly equity, who want their compensation to turn into a plan. If you're weighing a cash-versus-equity offer, managing income that swings year to year or thinking about ownership in a business, the ideas here are for you.

If you're a high-earning leader with variable pay, equity or an ownership stake and want to see how it all fits together, we'd be glad to talk it through. Book a free Wealth Strategy Call with us, and we'll look at your situation together.