Show Me the Money Incentive Compensation Plans for Service-Oriented Sales Teams

Argument Imagine You’re a SaaS Vendor: Base billed $13,000,000 Customer Churn is 2% Revenue Plan is $16,500,000 Quota & Commissions to Make Plan

Imagine You’re a SaaS Vendor:

Base billed $13,000,000

Customer Churn is 2%

Revenue Plan is $16,500,000

Quota & Commissions to Make Plan

Elephant & Squirrel The difference between selling legacy software & selling SaaS is the difference between hunting elephants & shooting squirrels.

The difference between

selling legacy software & selling SaaS

is the difference between

hunting elephants & shooting squirrels.

CAC What Is Your Customer Acquisition Cost? Marketing = Advert, Brand, Lead Gen Sales = COGS (base + incentive)

What Is Your Customer Acquisition Cost?

Marketing = Advert, Brand, Lead Gen

Sales = COGS (base + incentive)

Tech Services Rev Gen

Tech Services Rev Gen

Accountability... “ Customers are in control, [and] they are demanding … more accountability for results.” – Ray Lane Kleiner Perkins (former Oracle COO) “ The Coming Service Revolution” on SandHill.com , 2005 This idea is giving some ISVs heartburn. The rest are transitioning to SaaS.

“ Customers are in control, [and] they are demanding … more accountability for results.”

– Ray Lane

Kleiner Perkins (former Oracle COO)

“ The Coming Service Revolution”

on SandHill.com , 2005

...for Results

Accomplishment

Process?

Sales must reflect service commitment Customers want problems solved quickly Demonstrate it with every step A Sense of Urgency

Sales must reflect service commitment

Customers want problems solved quickly

Demonstrate it with every step

A Better Process

Comp Challenges How is SaaS different? Where is SaaS similar? Possible Solutions?

How is SaaS different?

Where is SaaS similar?

Possible Solutions?

Challenging Ideas Total Contract Value Plans Annuity Plans

Total Contract Value Plans

Annuity Plans

Compensation Planning Involves several steps: Plan Objectives Quota Revenue Documentation Administration

Involves several steps:

Objectives Recall Your SaaS Scenario: Base billed $13,000,000 Customer Churn is 2% Revenue Plan is $16,500,000

Recall Your SaaS Scenario:

Base billed $13,000,000

Customer Churn is 2%

Revenue Plan is $16,500,000

Establish New Recurring Revenue The Magic of Compound Interest Leverage the Compounding Effect “ The Rule of 78s”

Establish New Recurring Revenue

The Magic of Compound Interest

Leverage the Compounding Effect

MRR Scenario: Last year, your company billed $13,000,000 This year’s plan calls for 30% growth How much more must you bill each month ? “ The Rule of 78s”

MRR Scenario:

Last year, your company billed $13,000,000

This year’s plan calls for 30% growth

How much more must you bill each month ?

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec “ The Rule of 78s”

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec “ The Rule of 78s”

(($13,000,000 x 30%)=$3,900,000) ÷ 78 = $50,000 Quota $3,900,000 times = 78 Totals 50,000 time = 1 is billed 50,000 December’s etc. throughout the year… 500,000 times = 10 is billed 50,000 March's 550,000 times = 11 is billed 50,000 February's $ 600,000 times = 12 is billed $ 50,000 January's

A Simple Rate Commissions = 62.5% of New MRR 62.5% Commission Rate $120,000 Total On-Quota Sales 75,000 Targeted Commissions 75,000 Base Salary $150,000 On-Target Earnings

What Is Revenue? Billed Application Revenue Installation, Implementation, “Services” Renewals

Billed Application Revenue

Installation, Implementation, “Services”

Renewals

Theories of Motivation

Theories of Motivation

Tweaking Bring Focus by Adjusting Base Rate: Committed Revenue? New Logos? Accelerated Growth?

Bring Focus by Adjusting Base Rate:

Committed Revenue?

New Logos?

Accelerated Growth?

Calendar Friendship Compounding effect 1Q sales can be worth 5x 4Q sales Early start builds momentum But… Don’t get behind (It’s harder to make up)

Compounding effect

1Q sales can be worth 5x 4Q sales

Early start builds momentum

But… Don’t get behind

(It’s harder to make up)

“Turbo Dollars” ACCELERATE GROWTH Remove Earnings Caps “ The Sky’s the Limit”

ACCELERATE GROWTH

Remove Earnings Caps

“ The Sky’s the Limit”

Documentation & Admin

Timing Cash Is King Consider Payment Splits Incentive vs. Responsibility

Cash Is King

Consider Payment Splits

Incentive vs. Responsibility

Thank You contact: Keychain Logic Ken Boasso 925.552.9964 [email_address]

contact:

Keychain Logic

Ken Boasso

925.552.9964

[email_address]