That said.. a comp structure that would be best (in the world according to me) would be to have the hockey stick shaped comp plan with percentages values determined by contract length. Example Q1 pay for a 12 month contract 35%, 40% if 24 month contract, 50% if 36 month contract, etc. Q2 and subsequent Qs commission on that account would quickly ratchet down but, not dissapear.

No Dissincentive here. If you do an exceptional job at account management by bringing value to your clients, more sales will always follow. Hunters need not apply here, as the law of attraction takes its course. A slow/methotical hand off, (case by case) makes much more sense; similar to Marc M’s comment.

Hunters, hunt and closers close. So, let it be.

So…there is value in closing the sale, and there is value in keeping a customer, and there is value in increasing the amount of data that you hold from a customer.

Based on that, I would go with a flat commission as a percentage of monthly revenues. The sales guy now has to acquire the customer, retain the customer, and help the customer use the SaaS application effectively. These things are all in the best interests of the company.

If a sales guy morphs into an account manager, that is not a bad thing either. The traditional separation of sales and account management is driven by the big payment up front and the much smaller “maintenance” fees. The best part about this flat percentage compensation model is that the sales person is motivated to maximize subscription revenues, which is in full agreement with corporate goals.

This is a great topic. I agree that assigning an age to the commission formula can motivate salespeople. We are currently in the process of creating such a commission structure. On top of the initial commission, we were thinking of having monthly commissions paid for 12 months following the close of the sale. We were also thinking of adding another 6 months as long as the account has appreciated in value.

-A

I manage the Enterprise Sales Team at HireRight, a SaaS background screening solution that’s integrated with other SaaS plays (Taleo, Successfactors, and others). As you pointed out, traditional software sales leaders receive a large commission at the time revenue is realized. SaaS sales leaders, on the other hand, receive smaller annuity like payments over a period of time (also when revenue is realized). In our environment we, pay a bounty to sign a deal and then a higher rate on revenue over the course of 15 months (with a couple of extra months built in to account for implementation time and the time value of money). Additionally, during the first couple of months of this 15 month payment cycle there is a methodical hand-off from sales to account management. The sales team is then freed up to bring in more meat for the tribe and the account managers butcher it and prepare it for consumption. The model is working very well for us and we’re able to attract tip-top sales leaders (and earners) with the plan, among many other things.

Because the plan requires ramp up time to meet a reasonable OTE for top sales leaders we vet talent rigorously and, once they are selected, invest heavily in them through non recoverable draws–which makes them whole for the first year (as they build their annuity).

In sum, I could not agree more with you in that you certainly would not want your best hunters back in the village tending the flock.

Great topic! There is a SaaS sales group on LinkedIn (Enterprise On-Demand Software Sales (SaaS)). Please join if you would like….

Sincerely, Marc

Good point. I suppose offloading all account management to the closing sales rep won’t scale and could severely bog the salesperson down. I wonder if a “hand off” to dedicate amount managers is appropriate after enough time has passed such that appropriate commission was collected, but not long enough to allow too many account management duties to pile up would work.