Q: How do some salespeople make millions?
A very few SaaS AEs can make $1m a year. Because they are (x) in the top 1% and (y) at a SaaS company closing tens of millions of new bookings or more. It’s usually not possible before a SaaS startup crosses $20m-$40m+ in ARR, because you probably that one AE has close $3m-$5m or more in a year herself to take in a $1m commission. You need a big enough SaaS business for that to be mathematically impossible.
But almost every sales-driven SaaS company at some point, maybe after $40m or $50m in ARR, and sometimes earlier, has their first sales rep that makes $1m+. At least once.
In fact, personally, I’ve been in the room twice at other SaaS companies the day it happened.
How can this make any sense? Well, as a rough rule, SaaS sales professionals take home about 20% of each deal in comp. Often, this is split 10%/10% by base and variable … this can vary. But ~20% all-in is average. More on that math here: https://www.saastr.com/how-much-can-you-really-spend-on-marketing/
And often, there are accelerators for the reps that close the most, and these accelerators usually are not capped aggressively in fast-growing start-ups, if at all.
Now, imagine your “average” rep brings in $700k in bookings in a year, and takes home $140k (20%) all-in.
But one rep on the team is really, really good at the big deals. She closes $4m in one year. And gets an accelerator to 25%. $4m x .25 = $1m in comp.
That’s an insane amount of money. But also note that one AE that closed 6.5x more than the average one.
This is the way it should be. It’s what you want, if you want to grow fast. You want the best sales reps closing an insane amount of business, and at least for a while, being paid well to do so.
$1m is very, very rare. But outsized comp for outsized results is the winning play in SaaS.
This AE that made $1m brought in $3.25m more on perhaps the same number of leads as the average rep. If she can perform that magic — she should keep a decent chunk of it. The company is still way, way ahead even after paying out that monster check. Especially if that customer stays a decade or longer.
Published on July 12, 2020