A capable sales staff can be a company’s greatest asset.
As a sales consultant I have learned that successful SaaS companies have great inside salespeople that leverage a great sales process to grow their business.
The manner in which a sales staff conducts itself is often a reflection of the compensation program. Additionally, performance may be determined by how effective the compensation program is.
If salespeople believe that they are not being adequately compensated then they can become demotivated. As a result of this, they might choose to look for work elsewhere. This will deplete your sales staff and negatively impact upon your company’s profits.
Effective Compensation
Good SaaS sales compensation strategies should focus your sales staff on goals that are in alignment with your company’s corporate strategy. Most SaaS companies we work with have two missions for sales teams, new accounts and renewals.
Things to consider:
• First year value of the new account
• Typical renewal rate of your customers
• Do you want multiple year contracts
• Number of deals per month/quarter an effective salesperson can manage
• Sales cycle
• Spiffs and new account incentives
• Over Quota kickers
They should be simple yet effective, as it is essential for sales staff to fully comprehend how the process works.
Salespeople should feel as if they are in control of how great the rewards are for their work. This is the key to creating sales motivation.
A classic story is from Jack Welch, former CEO of GE. After his first year he was given a raise of $1,000. He was satisfied with the raise until he found out everyone in his area received the same increase in compensation.
Welch understood the role competition and compensation played in success. As he rose in the ranks at GE he made changes to the system and it helped to make GE one of the most successful companies in the world.
A Complex Process
The main way in which SaaS sales compensation differs from compensation for salespeople with other solutions concerns the basis upon which first year incentive costs are calculated. For the latter, the basis is unit price, whereas for the former, it is lifetime value of a deal. This means that many people regard SaaS sales compensation as relatively complex. Done right a great SaaS company has new accounts, predictable revenue and the sales team is well motivated and compensated.
However, mastering this area is essential for maintaining a company that is maximally profitable. Losing quality sales staff means losing money. Therefore, effective SaaS compensation for salespeople can mean the difference between a company's success or failure.
