SaaS Companies are Revamping Sales Comp: Here's How

SaaS companies are thinking differently about their sales compensation plans. We recently teamed up with SPIFF to discuss trends impacting their sales comp policies and design. Our webinar explores ways we're helping organizations navigate these changes.

There are four current sales compensation trends: use of various sales crediting practices, application of accelerators, renewal compensation, and new hire adjustments. 

Sales Crediting
When and how to credit a seller for a deal is one of the hottest topics as companies shift their focus from bookings to consumption.

• More crediting events are happening further down in the revenue cycle, resulting in more milestone-based comp plans
• The shift to consumption-based payouts causes numerous ripple effects (e.g., smaller patches, adjusting quotas, managing seller cash flow, year-over-year crediting issues, level of turnover, etc.)
• Initial consumption payouts are based on estimated contract revenue (e.g., 35% of orgs pay only at booking, 72% pay at milestones)

Accelerators
Our year-over-year data highlights consistency in how organizations reward sellers for over-goal achievement.

• The upside opportunity for many SaaS companies is approximately 2x (110% of quota equals 120% of OTE)
• The use of multipliers is a common mechanic to drive desired deal attributes (70% of participants use multipliers in incentive plans)
• They typically multiply the value of the contract based on multiyear deals, net new accounts, certain accounts, etc.

Renewals
Who gets paid on renewals is more of a question than how they’re paid. Many organizations leverage a renewal quota that focuses on paying Net Revenue Retention. But who gets paid continues to vary based on the maturity and size of the firm:

• Smaller organizations tend to rely on CSMs initially and eventually introduce a Renewal Specialist and an Account Manager
• AE renewal compensation is increasing in firms that deploy consumption models requiring the AE to manage the full customer lifecycle
• Establishing policies for early renewals is essential - many organizations lack clear engagement rules on how it's handled

New Hires
We’ve seen adjustments in new hire policies as the labor market shifted dramatically this year. Organizations have pulled back on many elements of compensation as hiring has slowed.

• Our year-over-year data suggests shortening average ramp times where quota and comp are adjusted (e.g., the average new hire is receiving a quarter to ramp)
• The study also found that organizations offer either generous guarantees or nothing at all - there appears to be no grey area in new hire compensation policies
  

See How You Stack Up

Go deeper into SaaS sales compensation practices and policies with our latest benchmark study. This free resource will help your organization drive smarter incentive decisions. Access the report here.

Contact us to learn more about strategies and sales compensation practices that drive team performance.