Expanding your sales team into a new market is exciting. Whether you're moving from high-cost hubs like San Francisco and New York to more affordable cities like Austin, Raleigh, or Salt Lake City, the assumption is often that hiring will be cheaper. While that's sometimes true, many companies make a crucial mistake: they don’t check actual compensation data.
This oversight can lead to serious financial consequences—either dramatically overpaying and wasting budget or underpaying and failing to attract the right talent. In this post, we’ll explore how to set sales compensation strategically, what percentile to target, and how one company nearly wasted $150,000 on a misinformed hiring decision.
The Compensation Blind Spot
A common scenario unfolds when companies expand into new markets:
They hear that a location has lower costs.
They assume sales talent will be much cheaper.
They make offers based on gut instinct rather than market data.
They either fail to attract top talent or waste budget on unnecessarily high salaries.
For example, a Series C company recently approached me looking for an SDR (Sales Development Representative) leader in Utah. They had experience hiring in San Francisco and assumed they could drastically cut costs by moving hiring efforts elsewhere. Their proposed salary? $300,000 per year.
For an entry-level SDR leader with only a few years of experience, this was completely unnecessary—the actual Utah market rate was between $125,000 and $150,000. This is a prime example of why data-driven compensation decisions are essential when expanding your sales team.
How to Determine the Right Compensation
1. Use Reliable Compensation Data
Instead of guessing or basing decisions on informal conversations, leverage compensation tools to get real market data. Two key resources I recommend are:
Carta Total Comp – Ideal for startups, covering about 75% of the roles you’ll need.
Radford – A more comprehensive option for larger companies with deeper salary insights across industries.
These tools provide salary benchmarks based on company size, industry, location, and role. While they come at a cost ($2,500/year for Carta Total Comp and $10,000+/year for Radford), the investment can save hundreds of thousands of dollars in hiring mistakes.
2. Decide Which Percentile to Pay
Once you have compensation data, the next step is to determine where you want to position your salaries in the market. Here’s a quick breakdown:
50th Percentile (Market Average) – Your offers will match most competing companies.
25th Percentile (Below Average) – Suitable for low-accountability roles with minimal self-generated pipeline responsibility.
75th Percentile (Above Average) – Best for attracting high-performance salespeople, especially in leadership positions.
90th Percentile (Top-Tier Pay) – Reserved for highly competitive, specialized roles where you need the absolute best talent.
3. Match Compensation to Accountability
One key mistake companies make is paying too little for high-accountability roles or overpaying for low-accountability roles. Here’s how to align comp with expectations:
✅ High-Accountability Roles (e.g., self-generating sales reps, quota-driven teams) → Pay at least the 50th-75th percentile.
✅ Low-Accountability Roles (e.g., inbound-only reps, transactional sales) → 25th percentile may be sufficient.
If you expect your sales team to work hard, hit aggressive quotas, and generate their own pipeline, paying bottom-tier salaries won’t attract the right talent. It’s essential to be realistic about what you’re asking for.
4. Build a Long-Term Compensation Philosophy
Your company’s approach to compensation shouldn’t be random—it should be a structured philosophy that aligns with your growth strategy. This means defining:
Which markets you’re hiring in
Which percentile you want to pay in each region
How compensation aligns with company goals
What trade-offs you’re willing to make (e.g., higher salaries for key leadership roles)
With a clear philosophy, you won’t have to guess every time you make a hire—you’ll already have a framework for making informed decisions.
Final Takeaways
Don’t assume hiring in a new market will automatically be cheaper—verify compensation data first.
Use reliable salary benchmarking tools like Carta Total Comp or Radford to guide decisions.
Align pay with accountability—if you expect top-tier performance, compensate accordingly.
Develop a compensation philosophy to guide future hiring and prevent costly mistakes.
At the end of the day, you can pay whatever you want—but do it based on data, not assumptions. That’s how you scale a high-performing sales team while avoiding wasted budget.