The most important person on a sales team is arguably the VP Sales. Why? As a business manager, customer manager and people manager, they are responsible for all of the key drivers of profitable revenue growth. As ZS Associates correctly states, a great VP Sales is “the force behind the sales force.”
But with this volume of responsibility comes a top-tier pay grade that corresponds to the amount of work, their existing level of experience, and the results they actually produce.
The question is: How do you know what an appropriate salary is for a VP of Sales?
According to PayScale, the nationwide average for this role is about $124,193 per year – and, according to Indeed, salaries for this role are at an all time high. Our own wage data tells a similar story, with CSOs earning 16% more than they did two years ago.
But we wanted to go deeper and examine 5 sectors to uncover some of the average salaries for this role, as well as how variables like location, experience, qualifications, expectations, and company size impact earning potential. It should be noted, however, that base salary and on-target earning potential varies significantly between companies, and that bonus ‘splits’ are impacted by company size, growth potential, and sector, and are typically offset by company equities.
VP of Sales: Software
Sales professionals within the software industry have some of the highest commission payouts of any industry (upwards of $1M), and therefore have some of the highest annual earning potentials. In fact, data from Salary.com and Monster.com show that software & networking salaries for top sales executives are more than 10% higher on average than in every other industry. Our data confirms these findings, with software sales leaders earning ~12.5% more than their peers in the industrial, manufacturing and professional service verticals.
But on our end of the spectrum, we’ve seen top reps go far beyond this earning level.
For top-tier software companies like Oracle and Microsoft, great sales reps can earn a salary of more than $250K each year (including commissions and bonuses). However, for start-up software or software as a service companies (SaaS), pay incentives often come in the form of stock/equity for player/coach roles. Starting base salaries for a VP of Sales at these companies begins in the $160K-$175K range plus equity.
There is variance between different locations and varied experience levels, so here’s a glimpse at what a VP of Sales could earn in areas throughout the U.S. according to Business Insider data and our own:
Earning potential can greatly vary depending on the company, however. Looking at salary reports from Glassdoor, a VP of Sales working for Matrixx in Mountain View, California earns an average income of about $105,104, while one working for AvePoint in Jersey City earns $127,788.
Here is a quick breakdown of average base and on target earnings across 10 major U.S. markets according to our own data, irrespective of company size:
VP Sales: Manufacturing
Based on national averages, the salary for a VP of Sales for mid-sized manufacturing companies can range from slightly below the national average to well above for this job title. According to Salary.com, the average VP of Sales earns a base salary of approximately $200K, with a variable OTE depending on the specific market.
Overall, a VP of Sales in this industry could expect to earn an average base salary ranging between $190-250K.
Fluctuations in salary may be due in part to the fact that the manufacturing industry is still recovering from the recession, as one report notes that manufacturing (on the industrial production side) still has to increase by 3.4% to reach pre-recession production levels.
Over the past five years, manufacturing growth was slower than expected, averaging only about 1% growth each year, as noted by the MAPI Foundation. Total growth since 2010 was 4.5% slower than last reported, with the largest downward revisions occurring in 2012 and 2013. Future growth is also expected to maintain a slow and modest upward trajectory, as shown in the table below:
The foundation’s data that indicates both iron/steel products and mining/gas field machinery manufacturing industries have taken particularly hard hits recently. The good news: both are projected to bounce back by 2017.
We combined our data with data from Glassdoor and Salary.com to find that a VP of Sales in the manufacturing sector typically earns a base salary between $170-210K per year in different locales across the U.S.
VP of Sales: Telecommunications/IT
When we think of telecommunications and Information Technology (IT), we think of companies like IBM, Hewlett-Packard, Verizon, and AT&T. Rapid growth over the past 10 years on the mobile side of telecommunications has created an aggressive sales market, as seen in the data from IBM below:
So what can a VP of Sales expect to earn at large and mid-sized telecom and information technology companies? We examined some of the averages on Glassdoor and found variances based on company size and location.
Monster.com indicates that the average base salary is about $80K, but that OTE can include an additional $100-200K annually (as telecomm is an industry with intense competition for market share).
Studies from PayScale show that in the telecomm industry, a proven VP Sales, with 5 to 10 years of experience, earned an average of 7% more than his or her peers, one with 10 to 20 years of experience earned 14% higher, and that late-career executives earn about 16% higher than the national average.
It’s important to note that stock options almost always tie-in to the VP’s total income within this industry, since many telecommunications and IT companies are publicly traded. But across the board, a total annual salary of $250K+ is standard – even for mid-sized companies.
VP of Sales: Pharmaceuticals
Looking at the 2015 Pharma Salary Report that reviewed data from more than 3,000 medical and pharmaceutical sales professionals, hiring managers can get a comprehensive view of what a VP of Sales in this industry can expect to earn.
It’s interesting to note the difference between salaries within this industry for pharmaceutical versus specialty pharmaceutical, however, it shouldn’t be surprising to see higher incomes in the specialty pharma category (as specialty drugs for less common diseases typically come with a higher price tag.)
In this industry, age and experience are key variables that affect the industry’s average salary. The survey found that, regardless of position title, those under 30 years of age typically struggled to break the $100K salary range, and that the largest salaries went to those who fell into the 51+ age range.
So how much does experience impact the average salary in the pharmaceutical market – as well as commissions and bonuses?
Those with 20+ years of experience, on average, earned a base salary of $100K or more, with additional annual compensation of $40K+ on top of that. In comparison, those with less than two years of experience earned a base salary of around $66,172, with additional bonuses of about $19,453. Frequency of travel is also a factor – and the numbers show that the more travel that is undertaken, the higher the average income can be earned.
With a title of VP of Sales for this industry, the study reports an average salary of $158,750 per year plus as much as $58,929 in bonuses–for a total of $217,679 per year.
The good news for VP Sales candidates is that the average incomes within the pharmaceutical sales industry is on the rise, with a 5% increase over 2014. According to the report, 2015’s average total incomes were the highest they’ve been since 2011.
Wrap Up: Attract the right VP Sales with a great compensation package
Sales compensation has an enormous impact on attracting the right VP of Sales. In order to attract the most suitable and qualified candidates, it is essential that organizations design compensation packages that are tied to the right goals; that offer simplicity and ease in comprehension; and most importantly, meet or exceed what the market is bearing.