How to align Go-To-Market Strategy with your Sales Compensation Plans [Saas Focus]
For many Saas companies there is always a question on what to measure/incentivize the commercial team on in relation to the business objectives. Depending on your companies maturity and length of business cycles this can vary drastically. To help guide you through this process there is one question that needs to be answered which should help .
What is the role and focus on the sales rep? Here are a few answers to help elaborate the point here.
If your business is focused on pure growth (Rule of 40, etc) and not MRR then the focus of the sales reps should be on bookings and bookings only. Your plan can pay the rep at the time of a qualified booking and then their focus will be on to the next booking. This is more designed for a hunter type sales role with a focus on the booking event and or renewals. A concern here can be a sell and walk away. You will need a strong Customer Success and or Professional Services team that can help transition the booking to implementation and then finally usage by the customer.
If your business is focused on long term revenue recognition and multi year contracts then compensating reps on the initial booking while also having money tied to the revenue over the length on the contract will be ideal. The balance here will be to ensure that reps do not have a backlog of commissions coming into the year. This can demotivate and the reps will be getting paid their On Target Earnings (OTE) without any new business coming in.
If sales reps are responsible for non-recurring revenue associated with an implementation such as services there should be commissions tied to this. Due to the profile margin nature of services vs software the commission rate or weighting should be aligned with the profitability.
If you have an established business with a core product offering and are now investing in expanding beyond that core offering this should also be reflected in your sales compensation plan. The balance here is to not de-incentivize the core offerings but also put an emphasis (SPIF, Additional Quota Retirement, Separate quota/weighting, etc) on the beyond core offerings.
There is not one size fits all but there are options. Asking these types of questions while also keeping the Sales Incentive Golden Rules in mind will help ensure your reps have a clear understanding of what is expected of them and how to be successful.