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What SaaS Providers Need to Know About Sales Compensation

At some point, everyone needs to get paid. This also applies to the folks who work hard selling SaaS subscriptions. This can present a challenge for the business owner. Unlike a traditional sales job, the sale doesn’t necessarily end when a customer signs the contract. In SaaS, the goal is to retain customers for the long haul. This is the only way to maximize revenue. When companies take care of their customers, compensation will follow.

Unlike a traditional sales job, the sale doesn’t necessarily end when a customer signs the contract. In SaaS, the goal is to retain customers for the long haul.

Understanding Your Primary Key Business Objectives

Unlike a traditional sales job, the sale doesn’t necessarily end when a customer signs the contract. In SaaS, the goal is to retain customers for the long haul. People will come and go during the business sales cycle. Some customers sign up simply to get a taste for the software, then they decide it’s not what they want. Others sign up and are enthusiastic but fall by the wayside because SaaS companies fail to service the customer’s needs. Then, there are those customers who engage with their supplier for life. These are the customers that yield the greatest ROI. Primary business objectives are relative to the following actions.

  • New recurring revenue must be booked at every available opportunity.
  • Collect as much upfront from new customers as possible. Customers are more committed when there is a greater outlay on their part.
  • Sign long-term contracts such as annual vs monthly. Longer contracts result from better sales, giving customers a viable reason to sign contracts for longer lengths of time. It’s also an indication that a customer is serious about results.
  • When renewing a customer’s contract, drive the maximum rate possible, but be sure their renewal rate is tied to value-added services that can make a difference. Otherwise, you may lose a customer for life.

How to Drive SaaS Customer Retention

When customers leave, stop paying, refuse to renew, or simply get issued a new credit card, churn rate rises. It’s the last thing any SaaS provider wants to deal with. Whatever the reason customers fail to retain services, the SaaS provider will immediately feel the difference in their revenue stream. And the biggest problem is that SaaS providers rarely see the train coming down the track.

Your SaaS company needs to ask the following questions at every step along the way:

  • What can we do to keep churn from happening? Is there anything we do, right now, to prevent it?
  • What are the reasons that SaaS companies fail? Are we exhibiting any such signs of failure?
  • Are we doing everything we can to add value for each customer? How do we know this for a fact, or are we just making the assumption?
  • What do we have in place to make sure they’re really using our services, and not missing anything?
  • How are we segmenting the loyal customers from those who are curious for the moment?
  • Is our product doing all that we said it would?

When customers leave, stop paying, refuse to renew, or simply get issued a new credit card, churn rate rises. It’s the last thing any SaaS provider wants to deal with. Of course, you could ask yourself such questions 24/7, or for the next decade, but it will matter little if you’re not gaining insights and taking immediate, effective action.

When customers leave, stop paying, refuse to renew, or simply get issued a new credit card, churn rate rises. It’s the last thing any SaaS provider wants to deal with.

Understanding Your Secondary Business Objectives

It’s always good to have secondary business objectives that follow right behind your primary ones.

  • Optimize each deal. Just consider whether going for the big ones are worth trading for smaller ones that might complement faster sales cycles.
  • Inform your customers of a new product mix that has just been added to your product line. Keep them informed, and interested. “Man the oars.”
  • You may even choose to sign up new accounts who are willing to become references for your services. For some, this can be a deal that’s too sweet to pass by.
  • Sign up larger, well-recognized brands. This goes back to how well your sales reps can sell products.
  • Sales reps with the least amount of discounts should get some type of reward. However, you have to be careful that you’re not alienating other reps for their hard work.
  • Bookings are everything: “Always be selling.”

Don’t Complicate Sales Compensations

Like any compensation plan, it needs to be easy for sales reps. Sales is hard work. An employee shouldn’t have to struggle with understanding how they’re going to get paid. The rewards plan should be straight forward. Winning new accounts should always be rewarded. New accounts can be the lifeblood of a provider. Just never lose sight of each account that you have signed on. That’s why there is so much churn in the industry. Customers always ask, even if silently, “Now that I’m yours, what’s next?”

An employee shouldn’t have to struggle with understanding how they’re going to get paid. The rewards plan should be straight forward. Winning new accounts should always be rewarded.As stated, paying commissions ahead of time can be a challenge because it takes time to realize a profit. Some providers choose to pay their sales reps when cash is actually received. This can be a challenge for sales reps who will spend quality time asking if the “eagle has landed.” On the other hand, it’s somewhat rare for full commissions to be paid upfront unless the customer pays the entire amount of their contract in full.

An employee shouldn’t have to struggle with understanding how they’re going to get paid. The rewards plan should be straight forward. Winning new accounts should always be rewarded.

Winners Win – and Losers Lose

It brings to mind the 1992 Movie, “Glengarry Glen Ross” where a firm’s real estate agents are given until the end of the week to produce—or be fired. It’s an all-time classic! However, it would be easy to say that times have changed, or perhaps they haven’t. The one consistent thing you can depend on in today’s competitive business landscape is that employees are always looking for the next lifeboat. As a business owner, you have to be very careful how you treat both the winners and those who aren’t winning as much.

Rewarding the Producers

The reality is that salespersons that perform high are usually quite profitable for companies. Those who underperform, usually, are not. There’s always a reason that some sales reps outperform others. When someone goes beyond their quota, it can drive profits for the organization. As such, base salaries are usually fixed, which means that new revenues that are above quota always have a much higher rate of return. As in any business, underperforming sales reps can also take up valuable slots that aggressive reps could have filled and closed.

There’s always a reason that some sales reps outperform others. When someone goes beyond their quota, it can drive profits for the organization. As such, base salaries are usually fixed, which means that new revenues that are above quota always have a much higher rate of return.One way of rewarding high performing sales reps is to offer “accelerators” that pay out higher commission as quotas are surpassed. This can reward the high performers and penalize the low performers. Offering graduated commission rates, that start slow, is another way of separating the winners from the losers.

There’s always a reason that some sales reps outperform others. When someone goes beyond their quota, it can drive profits for the organization. As such, base salaries are usually fixed, which means that new revenues that are above quota always have a much higher rate of return.
 
 

Expansion Revenue

Expanding present accounts can be cheaper than acquiring new ones. That’s a given. However, you don’t want to set the standard that it’s better to work existing customers for an upgrade, at the expense of overlooking new sales. New sales are what keeps driving growth.

The last thing you want to do is pay the same commission for upgrading customers that you do for acquiring new customers. There are some companies that make this mistake.

Here’s a Review of How to Reward Your SaaS Sales Team

  1. Sales compensations can be designed to drive the company’s top business goals. Those goals should include increasing renewal rates, keeping customers engaged and happy, and offering incentives for customers to become life-long customers.
  2. Keep your compensation plan as simple as possible. Reward those who do well, and keep working with those who do not. Every company knows there’s hope for an employee to have a break-out moment. It can be as expensive as well to train to employees. Get the most out of what you have.
  3. Rewarding high performance inspires other to accomplish the same. Graduated commissions and accelerator are one way of accomplishing this.
  4. Reward reps who are aggressively seeking new business. New business is what keeps the front door open.
  5. Keep training your reps to produce as much as they can. Some of your best sales reps might be wondering if another company might be a better fit for them. You can never tell who will be top dog next month, or next year.
Reward those who do well, and keep working with those who do not. Every company knows there’s hope for an employee to have a break-out moment. Reward those who do well, and keep working with those who do not. Every company knows there’s hope for an employee to have a break-out moment.

Reward excellence, but never separate your teams into “A” and “B” teams. Why? Because they will live up to your expectations. Many companies would rather have ten good sales reps than one superstar, and nine marginal performers. If you’re in doubt, take a little time off from your busy schedule and pick a favorite sports team—then watch the performances when a star player is injured. Everyone else picks up the pace rather miraculously.

If you’re in SaaS, you’re in a highly competitive business. The fact that you’ve gotten this far is a testament to your tenacity and will to survive, and excel. Happy selling!

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Gene Krause

Gene has been consulting businesses of all sizes for 18 years and providing them with strategic payments and gateway integrations.

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