By Julio Martínez
I recently tied the bonus of our VP of engineering to our ARR target. Initially, he said I was insane. But six months later, he thanked me. The distinct mindset shift — from owning a function to owning the outcome — changed everything.
Startups are under more pressure than ever to hit revenue milestones with leaner teams. Yet compensation models don’t always reflect this. It’s common for sales teams to chase bonuses while the rest of the organization operates on fixed salaries, detached from the company’s growth. That’s a missed opportunity.
When introduced correctly, variable compensation can align your entire company around your growth and foster a performance-based culture where everyone thinks like an owner. Here’s how you can implement variable compensation across your startup, without wrecking your team’s morale in the process.
Pick one North Star metric and stick to it
Startups are chaotic by nature. Priorities shift, roadmaps pivot, and focus is hard to hold. That’s exactly why variable compensation needs to be grounded in a single, unifying metric, usually ARR.
At Abacum, the entire company rallies around Net New ARR. This means it’s not just a finance metric; it’s our compass. It aligns every team, from engineering to customer success, around one shared definition of success. This forces teams to zoom out, think bigger and collaborate cross-functionally.
Pro tip — don’t overcomplicate this. Pick one metric that matters and make it the center of gravity for everything you do. If your company lives or dies by revenue growth, ensure that everyone lives and breathes that metric.
Make it meaningful
A 5% bonus might look good on paper, but it won’t change how people think or act. If you want real behavior change, the incentive needs to be big enough to matter.
At Abacum, we offer variable compensation of around 20% across the business. It’s meaningful enough to make people sit up, lean in and focus on moving the needle.
When it comes to creating a high-performance culture of accountability, individual KPIs alone don’t cut it. You’re not trying to reward task completion; you’re rewarding business impact.
When bonuses are tied to company-wide outcomes, people stop thinking in silos and start thinking like owners.
Pay MORE when the business wins
One of the most powerful cultural levers in a startup is sharing upside. When your team feels the win financially, not just intellectually, they don’t just celebrate, they double down. They work harder, smarter, faster and more collaboratively to do it again.
Founders need to scale bonuses with overachievement. The more a team exceeds targets, the more they earn, no caps. Keep the structure simple so everyone understands how their efforts drive upside. Your comp model should reinforce the idea that you’re a team that builds and celebrates together.
Make it hurt when the business misses
Accountability separates serious startups from the rest. If bonuses still get paid when the company misses its goals, they stop being incentives and start becoming participation trophies.
At Abacum, we don’t finger-point when we fall short. But it is a catalyst for a serious conversation. What went wrong? What do we need to learn? What should we do differently next quarter? That reflection fuels progress, but only if the miss has real consequences.
Big upside for overperformance is powerful, but there must be consequences for underperformance as well. Otherwise, you’re sending the signal that outcomes don’t actually matter.
Why this model works
Variable compensation isn’t just a perk — it’s a tool for driving real ownership. When every function is tied to outcomes, people stop measuring their individual outputs and start thinking in terms of business results. It’s not about how long you sit at your desk, it’s about what you deliver when you’re there.
Many startups avoid this model because it feels risky outside of sales. But the real risk? Letting your team operate in silos, disconnected from whether the company sinks or scales. That’s how cultures stagnate.
If you want to attract talent who want to build value, not just collect a paycheck, and a team that moves in sync, thinks like owners, and rows in the same direction — don’t just talk about alignment. Put your money where your mouth is and make it count.
Julio Martínez is the co-founder and CEO of Abacum, a company specializing in financial planning and analysis software for mid-market firms. Abacum’s all-in-one platform enables CFOs to forecast revenue, plan headcount and account for unseen financial circumstances amidst tough macroeconomic headwinds. Under Martínez’s leadership, the company has expanded internationally, with its headquarters in New York City, and offices in London and Barcelona. Before co-founding Abacum, Martínez had a career in finance and technology. In 2018, he attended the Stanford Executive Program at Stanford University’s Graduate School of Business.
Illustration: Dom Guzman
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