In today’s episode, Matt and Dan break down compensation structures in private equity, focusing on sourcing professionals and business development (BD) teams. They emphasize aligning base, bonus, and carry structures to drive scalable capital deployment and discuss how discretionary bonuses and performance-based incentives ensure long-term success. The episode also covers salary ranges across experience levels and highlights the growing importance of BD professionals in shaping firm outcomes.
As private equity compensation trends evolve, our hosts outline how aligning incentives with firm goals builds high-performing sourcing teams. From base salary to carry structures, they offer a roadmap for creating competitive, results-driven compensation plans. In today's competitive landscape, firms that implement these strategies will lead in talent acquisition and capital deployment. You can’t afford to miss this must-hear episode packed with crucial insights for thriving in private equity business development.
Episode Highlights:
00:00 Understand Differences in Private Equity Compensation Structures
01:22 Break Down Base, Bonus, and Carry for Sourcing Roles
02:31 Identify Standard Compensation for BD Professionals
03:40 Review Base Salary Ranges for Sourcing Professionals
05:48 Balance Base Salary and Bonus for Maximum Performance
06:49 Differentiate Between Junior, Mid-Level, and Senior Tiers
07:18 Adjust Bonus Structures Based on Experience
09:00 Set Clear Expectations for Base Salary and Bonus
10:50 Structure Discretionary and Performance-Based Bonuses
11:09 Implement Common Bonus Structures
12:42 Tie Discretionary Bonuses to Firm Performance
14:54 Incentivize Sourcing Teams
16:50 Adopt Performance-Based Bonuses for Larger Teams
18:01 Use Common Performance Metrics to Drive Compensation
19:06 Decide on Flat or Percentage-Based Bonuses
21:12 Distinguish Proprietary vs Banker-Sourced Deal Compensation
23:20 Clarify Add-On vs Platform Deal Bonuses
25:50 Align Sourcing Compensation with Lehman Fees and Buy-Side Origination
27:50 Embrace the Evolution of BD Compensation in Private Equity
29:04 Bridge the Gap Between BD and Deal Team Compensation
31:00 Offer Carry Compensation for BD Professionals
35:15 Use Equity in Sourced Companies as an Incentive
37:37 Incorporate Team Bonuses into BD Compensation Plans
40:29 Tailor Carry Packages to Attract Top Talent
44:10 Plan for Long-Term Carry and Vesting
48:08 Adapt Sourcing Compensation to Firm Goals
50:44 Prepare for the Future of BD Compensation in Private Equity
52:59 Structure Compensation to Build a High-Performing BD Team
59:51 Apply Best Practices for Performance-Based BD Compensation
01:02:57 Negotiate and Maximize Your Compensation in BD Roles
Key Takeaways:
"Not every private equity firm is the same. Maybe they're value-focused, or maybe they're a bit more patient. All of that influences compensation structure."
"In years where folks have success, the bonus can far surpass their base salary."
"The three main pieces of private equity compensation are base salary, bonus, and carried interest or equity."
"In years where folks have success, the bonus can far surpass their base salary."
"The BD function is maturing. Compensation is growing, and the gap is narrowing between BD professionals and their deal team counterparts."
Links:
Dan Herr: https://www.linkedin.com/in/danielherr/
Matt Rooney: