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When it comes to SaaS sales, I recommend reading SaaStr from Jason Lemkin, ex-Echosign founder (grew business from $0 to $50,000,000, then sold to Adobe). His advice is pure gold. Here is an initial comp plan. Visit his blog for more Competitive Base Salary — But You Cover it (Including Benefits) Before Any Bonus. Whatever you base is each month – $4k, $6k, $10k, whatever … you first have to bring in the revenue to cover it before you get any bonus. I.e., no commission at all until you pay off your base salary + benefits, or say 125% of that month’s base. It’s similar to a draw, but not a true draw — your base salary is a salary. (True draws are not competitive.)
But then, Pay 2x as Much in Commission. You’ll have to figure your own exact model out, but basically for us, I figured if reps paid their base first, and the losers then didn’t suck up a lot of cash — I could push the full 20-22% of ACV straight to the rep as commission. And even more if 80%+ of them all hit their plan. It’s what you’d end up paying in the BigCo plan anyway. So instead of a 10-11% commission, I paid ~25%. But only once you paid back your base. (The exact % may vary for you based on your unit economics).
One Accelerator: Cash Up Front. Paying 25% instead of 10-12%, but only once you pay for your base salary, is itself an inherent accelerator. The sky is the limit once you’ve paid your base back. But there was one thing that mattered when I wanted to be cash-flow positive: cash. So I paid more for cash-up front deals. Less for the rest (this may not matter for you if you don’t do monthly or quarterly options). And I paid a partial-to-full commission on any Year 2 cash, upfront. That cash now was very valuable.
Payment Upon Receipt of Cash, Not Contract E-Signing. Later, once we were past $15m or so, this didn’t matter so much. But until then, it was my way of aligning interests. I’ll pay you a lot. If you perform. But only once you take care of business and take care of the company. And get the cash in the door. Reps hate this. But if they are going to stay 12+ months … it doesn’t matter. They’ll see that. Especially if the top reps are driving M6 convertibles. It worked great for me. There were automatic accelerators. The sky was the limit for the A+ reps. There was no need to "ratchet up" the plan. It rewarded the hungry. We still had quotas, of course. Our initial annual ACV quotas varied from $380k or so to about $550k, and we continued to refine this over time as we got better at sales. But quotas just weren't as important, because the plan created the right incentives to hit these numbers and exceed them -- irrespective of what quotas were set. Source: http://saastr.quora.com/An-Initial-Sales-Rep-Comp-Plan-to-Lo... |