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Q: What is a good model for SaaS product sales commission? The average package price is USD 500 for subscription/month.
At the end of the day, most SaaS companies pay their reps from 20%-25% of what they close in total comp — base + bonus. Often at roughly at 50/50 ratio.
$500/mo is $6,000 a year so that’s a big enough deal size to support a traditional SaaS inside sales rep:
- Pay 20% of the expected ACV (annualized contract value) in total comp — but that might mean less commission until they’ve covered their base cost for the month. If the rep is on a “50/50” plan then roughly 10% of that might go to their base, and 10% to a bonus on top of that, until they’ve booked a certain amount each month or quarter. So the commission might be, say, $600 until they’ve close enough revenue to cover their base. Ultimately, it should all solve out to say 20% of the bookings goes out to sales comp, one way or another.
- If deal lasts < 12 months, you can claw back a proportionate amount. But unless churn is high, you’ll see it doesn’t matter that much in the long run.
- If cash is an issue, you can pay monthly instead. E.g., you could pay a $50/month commission for 12 months. Reps don’t love this, but sometimes it’s OK in the early days. But it’s a lot of accounting and not really worth it once you are at any scale.
- To make, say, $140,000 — they’d need to close $700,000 over the course of a year (5x), or 116 total deals over the year ($700,000/$6,000 ACV) … i.e., close about 10 deals a month. That’s pretty do-able for inside sales. An AE should be able close 10+ deals a month fairly easily if the leads are there.
A bit more here: The ultimate guide to SaaS Sales Compensation Plan | SaaStr
My Product is $500 a Month. How Much Should I Pay My Reps? originally appeared on SaaStr.com