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Show Me the Money: Incentive Comp for SaaS

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The difference between selling legacy software & selling SaaS is the difference between hunting elephants & shooting squirrels. On-Demand companies need their salespeople to behave differently, and those salespeople need to be motivated differently. This seminar presentation discusses how squirrel shooters should be managed & rewarded.

Publicado en: Empresariales
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Show Me the Money: Incentive Comp for SaaS

  1. 1. Show Me the Money Incentive Compensation Plans for Service-Oriented Sales Teams
  2. 2. Argument <ul><li>Imagine You’re a SaaS Vendor: </li></ul><ul><li>Base billed $13,000,000 </li></ul><ul><li>Customer Churn is 2% </li></ul><ul><li>Revenue Plan is $16,500,000 </li></ul><ul><li>Quota & Commissions to Make Plan </li></ul>
  3. 3. Elephant & Squirrel <ul><li>The difference between </li></ul><ul><li>selling legacy software & selling SaaS </li></ul><ul><li>is the difference between </li></ul><ul><li>hunting elephants & shooting squirrels. </li></ul>
  4. 4. CAC <ul><li>What Is Your Customer Acquisition Cost? </li></ul><ul><li>Marketing = Advert, Brand, Lead Gen </li></ul><ul><li>Sales = COGS (base + incentive) </li></ul>
  5. 5. Tech Services Rev Gen
  6. 6. Tech Services Rev Gen
  7. 7. Accountability... <ul><li>“ Customers are in control, [and] they are demanding … more accountability for results.” </li></ul><ul><li>– Ray Lane </li></ul><ul><li>Kleiner Perkins (former Oracle COO) </li></ul><ul><li>“ The Coming Service Revolution” </li></ul><ul><li>on SandHill.com , 2005 </li></ul>This idea is giving some ISVs heartburn. The rest are transitioning to SaaS.
  8. 8. ...for Results
  9. 9. Accomplishment
  10. 10. Process?
  11. 11. <ul><li>Sales must reflect service commitment </li></ul><ul><li>Customers want problems solved quickly </li></ul><ul><li>Demonstrate it with every step </li></ul>A Sense of Urgency
  12. 12. A Better Process
  13. 13. Comp Challenges <ul><li>How is SaaS different? </li></ul><ul><li>Where is SaaS similar? </li></ul><ul><li>Possible Solutions? </li></ul>
  14. 14. Challenging Ideas <ul><li>Total Contract Value Plans </li></ul><ul><li>Annuity Plans </li></ul>
  15. 15. Compensation Planning <ul><li>Involves several steps: </li></ul>Plan Objectives Quota Revenue Documentation Administration
  16. 16. Objectives <ul><li>Recall Your SaaS Scenario: </li></ul><ul><li>Base billed $13,000,000 </li></ul><ul><li>Customer Churn is 2% </li></ul><ul><li>Revenue Plan is $16,500,000 </li></ul>
  17. 17. <ul><li>Establish New Recurring Revenue </li></ul><ul><li>The Magic of Compound Interest </li></ul><ul><li>Leverage the Compounding Effect </li></ul>“ The Rule of 78s”
  18. 18. <ul><li>MRR Scenario: </li></ul><ul><ul><li>Last year, your company billed $13,000,000 </li></ul></ul><ul><ul><li>This year’s plan calls for 30% growth </li></ul></ul><ul><ul><li>How much more must you bill each month ? </li></ul></ul>“ The Rule of 78s”
  19. 19. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec “ The Rule of 78s”
  20. 20. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec “ The Rule of 78s”
  21. 21. (($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
  22. 22. 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
  23. 23. What Is Revenue? <ul><li>Billed Application Revenue </li></ul><ul><li>Installation, Implementation, “Services” </li></ul><ul><li>Renewals </li></ul>
  24. 24. Theories of Motivation
  25. 25. Theories of Motivation
  26. 26. Tweaking <ul><li>Bring Focus by Adjusting Base Rate: </li></ul><ul><ul><li>Committed Revenue? </li></ul></ul><ul><ul><li>New Logos? </li></ul></ul><ul><ul><li>Accelerated Growth? </li></ul></ul>
  27. 27. Calendar Friendship <ul><li>Compounding effect </li></ul><ul><ul><li>1Q sales can be worth 5x 4Q sales </li></ul></ul><ul><li>Early start builds momentum </li></ul><ul><li>But… Don’t get behind </li></ul><ul><ul><li>(It’s harder to make up) </li></ul></ul>
  28. 28. “Turbo Dollars” <ul><li>ACCELERATE GROWTH </li></ul><ul><li>Remove Earnings Caps </li></ul><ul><li>“ The Sky’s the Limit” </li></ul>
  29. 29. Documentation & Admin
  30. 30. Timing <ul><li>Cash Is King </li></ul><ul><li>Consider Payment Splits </li></ul><ul><li>Incentive vs. Responsibility </li></ul>
  31. 31. Thank You <ul><li>contact: </li></ul><ul><li>Keychain Logic </li></ul><ul><li>Ken Boasso </li></ul><ul><li>925.552.9964 </li></ul><ul><li>[email_address] </li></ul>

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