Sales comp plan design and metrics for SaaS companies

About Cobb Consulting ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Preface – Questions from last Meeting ,[object Object],[object Object],[object Object]

Discussion Topics: ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Comp Follows the Strategy ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Reps Follow the Money ,[object Object],[object Object],[object Object]

INTERPRETING THE STRATEGY ,[object Object]

Company Stage - Skok Scaling the Business David Skok Presentation to MTLC Dec 2010 Search for Product/Market Fit Search for Repeatable & Scalable Sales Model Conserve Cash Invest Aggressively

Product Stage Influences Design ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Laggards Time Innovators Technology Adoption Lifecycle Customers’ buying habits impact on roles & metrics Early Majority Late Majority

Design your Sales Strategy ,[object Object]

Skok - Sales Strategy Impact on CAC A rough estimate of CAC versus Sales Complexity http://www.forentrepreneurs.com/sales-complexity/ David Skok Presentation to MTLC Dec 2010

Eligible Job Roles ,[object Object],[object Object],[object Object]

DESIGNING THE COMP PLAN ,[object Object]

Best Practice: Motivate ,[object Object],[object Object],[object Object],[object Object],[object Object]

Establish Target Pay - Basics Point of Excellence Top 10% of performers Target Total Comp (TTC) Aka: On Target Earnings (OTE) MIX Ratio of base and incentive relative to TTC Base Target Incentive Upside

Comp Philosophy for Target Pay* Lower target pay Higher target pay * Sales Compensation Made Simple World at Work Press P.42 40 th 50 th 60 th 75 th Percentile 1. Degree of industry stability Rock solid High Moderate Low 2. Desired business results Very likely Probable Difficult Unlikely 3. Expected employee performance Low Average Stretch Exceptionally high 4. Productivity level Low Average Above average Very High 5. Talent supply Abundant Adequate Limited Scarce 6. Employee mobility Low Modest Some hiring away by competitors Very Competitive ,[object Object],Excessive Adequate Light Lean

Mix and Upside * Sales Compensation Made Simple World at Work Press P.42 90 80 50

Payout Components ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Base Target Incentive Upside Upfront ARR 50% MRR 35% Qtrly Bonus -15%

Payout Timing – Reinforce Good Behavior ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Plan Documents ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

View Comp Across Job Roles ,[object Object],[object Object],[object Object],[object Object]

ASSESSING THE PLAN ,[object Object]

Assessing the Plan ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Pay for Performance ,[object Object],* Sales Compensation Made Simple World at Work Press P.126

Pay for Performance - Outliers * Sales Compensation Made Simple World at Work Press P.126 ,[object Object],[object Object]

Pay for Performance - Random * Sales Compensation Made Simple World at Work Press P.127 ,[object Object],[object Object]

Attainment Distribution * Sales Compensation Made Simple World at Work Press P.127 Percent of Reps Percent of Quota ,[object Object],[object Object]

Attainment Distribution Problems * Sales Compensation Made Simple World at Work Press P.132 Team of losers- goals too high Stars only – territories uneven

SAAS METRICS AND DRIVERS ,[object Object]

SaaS Issues, Metrics & Drivers ,[object Object],[object Object],[object Object],[object Object]

Problem: SaaS and On-Premise What would you do? Sell a $150K software installation engagement. Sell a $1,000/month SaaS Subscription of your software with a 3 year contract. ,[object Object],[object Object]

The Cash Flow Gap -Skok David Skok Presentation to MTLC Dec 2010 Cash Gap (Slightly later breakeven point, because Gross Profit is less than MRR) 11 months to breakeven

Most Common SaaS Metrics ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],What’s HubSpot?

Rethinking Marketing Outbound Marketing Inbound Marketing ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

HubSpot’s Marketing Platform Get Found Convert Analyze Advice Create SEO Mobile Social Media Promotion Drive Conversion Marketing Automation Social Media Analysis Analysis Support Experts Word Press SeoMoz Coder HootSuite Unbounce Marketo Radian6 Google Analytics On Your Own Consultant

Sales Model HubSpot http://www.forentrepreneurs.com/sales-complexity/

SaaS Sales Comp - HubSpot Case Study

Compensation Structure – Strategy Match Laggards Innovators Product Adoption Lifecycle Early Majority Late Majority Search for Product Market Fit

Phase 1: Product Market Fit ,[object Object],[object Object],[object Object],[object Object],Corporate Strategy >> Comp Structure ,[object Object],[object Object],[object Object],[object Object],Base (50%) Target Incentive (50%) Upside Velocity Retention

It worked ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],… for a while

Search for a Repeatable Sales Process Laggards Innovators Search for a Scalable & Repeatable Sales Process Early Majority Late Majority

Phase 2: Repeatable Sales Process ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Corporate Strategy >> Comp Structure ,[object Object],[object Object],[object Object],Base (50%) Target Incentive (50%) Upside Velocity Retention

It worked … but LTV calculations are unclear and often a lagging indicator New cohorts retained at much higher rates Customer Cohort … for a while

Scaling the Business Laggards Innovators Scaling the Business Early Majority Late Majority

Phase 3: Scaling ,[object Object],[object Object],[object Object],[object Object],Corporate Strategy >> Comp Structure ,[object Object],[object Object],[object Object],[object Object],* Start considering fit with manager comp plans Base (50%) Target Incentive (50%) Upside Velocity Retention

Lessons Learned ,[object Object],[object Object],[object Object],[object Object],[object Object]

Thanks! ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Sales comp plan design and metrics for SaaS companies

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