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  • Story – serial entrepreneur
  • Hhhh
  • George Beal and Everett Rogers at Iowa State U. Original purpose was to track the purchase patterns of hybrid seed corn by farmers.
  • VP Sales told me find the average comp in your market and add15% to attract high performers.
  • Low end – retail car sales
  • 15 components…bad
  • Litle story
  • Managing Expectations
  • In addition to annual upfront value, talk about understanding how to assess the LTV
  • I'm talking specifically about what to comp on Ltv - avg mrr/churn. ARPU ave rev per user Coca Margin Velocity Stages of funnel
  • Just announced that we passed our 4,000 th customer Skok is on our board – consider myself a student of his work/blog so you’ll see some repetition
  • All hunters – no farmers
  • Sales Comp Plans should not be static – needs to evolve with the organization Needs to match your strategy … may look like we knew what we were doing, but we acted fast when we realized things were wrong and tuned the model regularly
  • This stage is all about discovering the product market fit – and we did that. But now couldn’t enforce those learnings

110201 sales comp ppt Presentation Transcript

  • 1.  
  • 2. About Cobb Consulting
    • Sales comp plans that work
      • Review and assessment of plan effectiveness
      • New plan design
      • Cost modeling
      • Review existing payment processes
      • Technology or vendor selection
    • Advisor to software entrepreneurs
    • Founder of Makana Solutions and Centive
  • 3. Preface – Questions from last Meeting
    • How is sales comp handled when the company sells both SaaS and on-premise solutions?  Are there separate sales forces for SaaS and on-premise?
    • Do SaaS sales people get comp'ed for renewals?  Who handles renewals?  Hunters vs. gathers.
    • Are sales people comp'ed for total contract value?  When the deal closes, or over the life of the contract?  Is there a "claw-back" for non-renewing customers?
  • 4. Discussion Topics:
    • Some sales comp basics
      • Comp follows the strategy
      • Reps follow the money
      • Creating a comp plan
    • SaaS issues, metrics and drivers
    • Hubspot lessons learned
  • 5. Comp Follows the Strategy
    • Know your goals
      • Revenue, growth, profit
    • Understand your company stage
      • Startup, repeatable growth, maturity
    • Design your sales strategy
      • Organization design and job roles
  • 6. Reps Follow the Money
    • Does your plan communicate the strategy?
    • Motivate what can be controlled
    • Provide frequent feedback- $ & #s
  • 7. INTERPRETING THE STRATEGY
    • Considerations for Sales Comp
  • 8. Company Stage - Skok Scaling the Business David Skok Presentation to MTLC Dec 2010 Search for Product/Market Fit Search for Repeatable & Scalable Sales Model Conserve Cash Invest Aggressively
  • 9. Product Stage Influences Design
    • Bookings
    • Sell to anyone
    • Reward repeatability
    • Industry focus
    • Partners
    • Manage churn
    • Margins
    Laggards Time Innovators Technology Adoption Lifecycle Customers’ buying habits impact on roles & metrics Early Majority Late Majority
  • 10. Design your Sales Strategy
    • Sales Comp Design
  • 11. Skok - Sales Strategy Impact on CAC A rough estimate of CAC versus Sales Complexity http://www.forentrepreneurs.com/sales-complexity/ David Skok Presentation to MTLC Dec 2010
  • 12. Eligible Job Roles
    • All customer facing roles
    • Measurable influence over the actions of the customer
    • Willing to consider at least 15% of Target Total Comp (TTC) as incentive
  • 13. DESIGNING THE COMP PLAN
    • Considerations by Job Role
  • 14. Best Practice: Motivate
    • Make sure reps have control of the event
    • Be aware of competitors’ compensation
    • Communicate clearly, including the upside
    • Reward in timely fashion
    • Provide reps real-time visibility
  • 15. Establish Target Pay - Basics Point of Excellence Top 10% of performers Target Total Comp (TTC) Aka: On Target Earnings (OTE) MIX Ratio of base and incentive relative to TTC Base Target Incentive Upside
  • 16. Comp Philosophy for Target Pay* Lower target pay Higher target pay * Sales Compensation Made Simple World at Work Press P.42 40 th 50 th 60 th 75 th Percentile 1. Degree of industry stability Rock solid High Moderate Low 2. Desired business results Very likely Probable Difficult Unlikely 3. Expected employee performance Low Average Stretch Exceptionally high 4. Productivity level Low Average Above average Very High 5. Talent supply Abundant Adequate Limited Scarce 6. Employee mobility Low Modest Some hiring away by competitors Very Competitive
    • Staffing
    Excessive Adequate Light Lean
  • 17. Mix and Upside * Sales Compensation Made Simple World at Work Press P.42 90 80 50
  • 18. Payout Components
    • Limit confusion
      • no more than 3
      • weight by priority
    • Reward volume
      • ARR, MRR, churn…
    • Not duties
      • updating CRM
      • funnel activities
    • Rate: TIC/quota
    Base Target Incentive Upside Upfront ARR 50% MRR 35% Qtrly Bonus -15%
  • 19. Payout Timing – Reinforce Good Behavior
    • Frequency – pay as often as you can
      • Be clear about event: Booking, invoice, shipment, other
    • Considerations
      • Length of sales cycle
      • Length of order fulfillment
        • 90-120 days – 65/35 split
        • >120 days – 35/65 split
  • 20. Plan Documents
    • Be motivating – show them what they CAN earn
    • Include T&Cs
      • Crediting rules for measures
      • Transition policies
      • Customer changes
      • Ramp up of new hires
    • Be consistent
  • 21. View Comp Across Job Roles
    • Assess:
      • Value of role
      • Metrics that support strategy and teamwork
      • Fairness
  • 22. ASSESSING THE PLAN
    • Considerations for Monitoring Success
  • 23. Assessing the Plan
    • Performance reports
    • Employee motivation
    • Tell all graphs
      • Pay for Performance
      • Attainment Distribution
    • Return on investment - CCOS
  • 24. Pay for Performance
    • What you want…tight alignment
    * Sales Compensation Made Simple World at Work Press P.126
  • 25. Pay for Performance - Outliers * Sales Compensation Made Simple World at Work Press P.126
    • Why?…
      • Mixed job roles, MRR vs LTV, Special deals
  • 26. Pay for Performance - Random * Sales Compensation Made Simple World at Work Press P.127
    • Why?…
      • Monthly rates, gaming the plan, paying for the past
  • 27. Attainment Distribution * Sales Compensation Made Simple World at Work Press P.127 Percent of Reps Percent of Quota
    • Desired distribution – team of winners
      • Use to allocate quotas, measure performance
  • 28. Attainment Distribution Problems * Sales Compensation Made Simple World at Work Press P.132 Team of losers- goals too high Stars only – territories uneven
  • 29. SAAS METRICS AND DRIVERS
    • Considerations Unique to SaaS Companies
  • 30. SaaS Issues, Metrics & Drivers
    • Selling both SaaS and On-Premise
    • The Cash Flow Gap
    • Multi-year contracts (tricky)
    • Most common metrics
  • 31. Problem: SaaS and On-Premise What would you do? Sell a $150K software installation engagement. Sell a $1,000/month SaaS Subscription of your software with a 3 year contract.
    • Confirm strategy
    • Redesign job roles
  • 32. The Cash Flow Gap -Skok David Skok Presentation to MTLC Dec 2010 Cash Gap (Slightly later breakeven point, because Gross Profit is less than MRR) 11 months to breakeven
  • 33. Most Common SaaS Metrics
    • Good for comp:
    • ARR
      • Estimated
      • Up front payment
    • MRR
      • Actual
    • Contract length
    • By customer type
      • New
      • Tiered by expected ARR
      • Profit category
    • Renewal
    • Good to measure, but not for comp
    • LTV – avg MRR/churn
    • COCA
    • Velocity
    • Margin – if reps don’t have visibility too
    • Stage of funnel
  • 34. HUBSPOT
    • Considerations from the Real World
  • 35.
    • Inbound Marketing Software
    • 4 years old
    • VC Funded
      • General Catalyst
      • Matrix Partners
      • Scale Ventures
    • Board of Dir.
      • David Skok
      • Larry Bohn
      • Rob Theis
      • Gail Goodman
      • Andy Payne
    What’s HubSpot?
  • 36. Rethinking Marketing Outbound Marketing Inbound Marketing
    • SEO / SEM
    • Blogging
    • Social Media
    • RSS
    • Free tools/trials
    • Viral videos
    • Telemarketing
    • Trade shows
    • Direct mail
    • Email blasts
    • Print ads
    • TV/radio ads
  • 37. HubSpot’s Marketing Platform Get Found Convert Analyze Advice Create SEO Mobile Social Media Promotion Drive Conversion Marketing Automation Social Media Analysis Analysis Support Experts Word Press SeoMoz Coder HootSuite Unbounce Marketo Radian6 Google Analytics On Your Own Consultant
  • 38. Sales Model HubSpot http://www.forentrepreneurs.com/sales-complexity/
  • 39. SaaS Sales Comp - HubSpot Case Study
  • 40. Compensation Structure – Strategy Match Laggards Innovators Product Adoption Lifecycle Early Majority Late Majority Search for Product Market Fit
  • 41. Phase 1: Product Market Fit
    • Discover the market pain and find customers who will pay for the product
    • Experiment with broad prospect segments
      • 80% of inbound funnel
    • Optimize for discovery & customer velocity
    Corporate Strategy >> Comp Structure
    • Quota based on new MRR
    • All Month-to-Month contracts
    • Clawbacks
    • 100% kicker for new MRR above quota
    Base (50%) Target Incentive (50%) Upside Velocity Retention
  • 42. It worked
    • The model scaled
    • 0 to 10 reps
    • 1 to 2 products SKUs
    • 100’s of customers
    • … but hard to enforce discipline around acquiring retainable customers
    … for a while
  • 43. Search for a Repeatable Sales Process Laggards Innovators Search for a Scalable & Repeatable Sales Process Early Majority Late Majority
  • 44. Comp and LTV Misalignment
  • 45. Phase 2: Repeatable Sales Process
    • Refine the sales process to acquire retainable customers
    • Focus exclusively on best fit prospects
      • LTV:COCA > 3
      • Payback < 12 mo
      • 30% of inbound funnel
    • Optimize for repeatability
    Corporate Strategy >> Comp Structure
    • Quota based on MRR
    • Amount based on historical LTV tier (upside for 2x standard)
    • Clawbacks – 3mo
    Base (50%) Target Incentive (50%) Upside Velocity Retention
  • 46. It worked … but LTV calculations are unclear and often a lagging indicator New cohorts retained at much higher rates Customer Cohort … for a while
  • 47. Scaling the Business Laggards Innovators Scaling the Business Early Majority Late Majority
  • 48. Phase 3: Scaling
    • Scale core funnel and begin to test new growth opportunities
    • Experiment selectively with adjacent product / market fits
      • 80% of inbound funnel
    • Optimize for growth
    Corporate Strategy >> Comp Structure
    • Quota based on MRR*
    • Payout partially based on contract
    • Clawbacks – 6mo
    • 100% kicker for new MRR above quota
    * Start considering fit with manager comp plans Base (50%) Target Incentive (50%) Upside Velocity Retention
  • 49. Will this work?
  • 50. Lessons Learned
    • Align sales compensation to the needs of the business
      • This will change over time
      • This includes churn & LTV
    • Analyze each rep like a thin version of your entire company
    • Leverage SaaS benchmarks to ensure you’re on track – then hit the gas!
  • 51. Thanks!
    • Contact:
    • Liz Cobb
    • [email_address]
    • SalesCompStrategy.com
    • Brad Coffey
    • [email_address]
    • HubSpot.com
    • @BradfordCoffey