Designing an effective sales compensation plan is crucial for attracting, motivating, and retaining top sales talent in your SaaS business. A well-structured plan aligns your sales team's goals with your company's objectives, driving the right behaviors and results.
In this guide, we'll explore four real-world examples of SaaS sales compensation plans tailored to specific roles and responsibilities, from Account Managers focused on renewals and expansion to Account Executives driving new business growth.
We'll discuss the key components of each plan, provide actionable insights, and demonstrate how these examples can help you achieve your organization's revenue goals.
Before diving into the examples, let's discuss the essential elements of designing an effective sales compensation plan.
A well-designed plan should:
To create a plan that drives the desired behaviors and outcomes, carefully consider factors such as your company's growth stage, sales cycle length, and market conditions. Regularly review and adjust your plan to ensure it remains effective as your business evolves.
Account Managers (AMs) play a crucial role in SaaS companies by focusing on customer retention and expansion. An effective compensation plan for AMs should include a mix of base salary and variable pay, with a focus on renewal and expansion targets. The plan should also incentivize collaboration with other teams and reward AMs for bringing in new business through referrals.
In this example, we'll look at a Land & Expand compensation plan designed for an Account Manager named Jasmine.
Jasmine's Salary & Pay Mix:
Jasmine's Accounts & Renewal Quota:
Commission Rates:
Impact on Revenue:
As a decision-maker, it's essential to understand how this compensation plan can drive revenue growth and contribute to the overall success of your SaaS business. Let's take a closer look at Jasmine's performance and its impact on the company's bottom line.
Jasmine's total variable pay: $19,200
With her $96,000 base salary, Jasmine's total compensation = $96,000 + $19,200 = $115,200
Overall, Jasmine's performance under this Land & Expand compensation plan contributes a total of $950,000 in revenue for the company, broken down as follows:
By implementing this compensation plan, your SaaS business can incentivize Account Managers like Jasmine to focus on key revenue-driving activities, such as renewals, expansions, cross-team collaboration, and referrals. This not only helps maintain a stable revenue base but also promotes growth from existing customers, ultimately contributing to the long-term success and profitability of your company.
Want to implement a Land & Expand compensation plan for your Account Managers?
Download our free "Land & Expand Compensation Plan for AMs" template and start customizing it for your SaaS sales team today!
Account Executives (AEs) are responsible for driving new business growth in SaaS companies. A well-designed compensation plan for AEs should include a balanced mix of base salary and variable pay, with a focus on achieving and exceeding sales quotas. The plan should also incentivize shorter sales cycles and new logo acquisition to align with company goals.
Let's explore an example of a land and expand compensation plan for Account Executives (AEs) in a SaaS company. This plan is designed to motivate AEs to drive new business growth, shorten sales cycles, and acquire new customers while aligning with the company's overall objectives.
Company Background and Objectives:
Current Team Performance:
Expected Average Attainment Percentage:
Let’s look at the compensation plan based on these assumptions.
Salary & Pay Mix:
Quota & Commission:
Tiered Multipliers:
SPIFFs:
Impact on Revenue:
Let's consider an example where an AE achieves 110% of their annual quota and closes deals with the following characteristics:
Earnings Breakdown:
In this scenario, the AE's efforts contribute $990,000 in new revenue for the company, with a significant portion coming from deals closed within a shorter sales cycle. The AE also brings in 12 new logos, expanding the company's customer base.
By achieving 110% of their quota, the AE earns accelerated commissions, which serve as a strong motivator for overperformance.
The SPIFFs for shorter sales cycles and logo acquisition further align the AE's goals with the company's objectives, encouraging them to prioritize efficient sales processes and new customer acquisition.
Interested in creating a Balanced compensation plan for your AEs?
Download our "Land & Expand Compensation Plan for AEs" template and start building a plan that drives new business growth.
A tiered commission structure is a powerful way to motivate and reward your Account Executives (AEs) for their hard work and dedication. By setting clear performance benchmarks and offering increasing commission rates as those benchmarks are met, you can encourage your team to push themselves to exceed their quotas and drive more revenue for the company.
Let's break down how a tiered commission plan works and how it can benefit both your AEs and your business.
The tiered commission plan is based on an AE's quota attainment percentage. As the AE reaches higher levels of quota attainment, they unlock higher commission rates, which are applied to their total sales.
Commission Tiers:
Let's see how this would work for an AE named Sarah with a $60,000 variable pay component and a $900,000 annual quota:
If Sarah achieves 88% of her quota, selling $792,000, she would fall into Tier 2. Her total commission earned would be:
$60,000 variable pay x 88% attainment x 100% payout multiplier (Tier 2) = $52,800
In addition to the tiered commissions, the plan also includes SPIFFs (Sales Performance Incentive Funds) for specific achievements.
In this example, there are two SPIFFs:
If Sarah closed $198,000 worth of multi-year contracts and $198,000 worth of deals with upfront payment terms, she would earn:
$198,000 x 0.5% = $990 for each SPIFF Total SPIFFs earned = $1,980
Sarah's total variable earnings would be: Commissions: $52,800 SPIFFs: $1,980 Total: $54,780
The tiered commission structure and SPIFFs work together to motivate AEs to not only hit their quotas but also to pursue strategic objectives that benefit the company, such as securing multi-year contracts and upfront payments.
Impact on Revenue:
Let's consider the financial impact of this plan for a team of 8 AEs, each with the same $900,000 quota and $60,000 variable pay as Sarah, and assuming they all achieve 88% of their quota:
Total quota: $7,200,000 Total achievement: $6,336,000 Total commissions: $422,400 Total SPIFFs (assuming similar performance to Sarah): $15,840 Total payout: $438,240 Cost to company: 6.92% of total achievement
The tiered commission plan offers several benefits for both the AEs and the company:
Want to reward your top-performing AEs?
Download our "Tiered Commission Plan for AEs" template and start building a plan that motivates quota overachievement.
Sales Development Representatives (SDRs) play a vital role in SaaS companies by sourcing qualified opportunities and building pipeline. An effective compensation plan for SDRs should include a mix of base salary and variable pay, with a focus on both the quantity and quality of the opportunities they generate. The plan should also reward SDRs for contributing to closed-won deals to align with the success of the entire sales team.
In this example, we'll explore a compensation plan template designed specifically for SDRs, which includes a base salary, variable pay, and performance-based commissions.
The SDR compensation plan consists of three main components:
Let's dive into the details using the example of an SDR named Mark.
Mark's Salary and Variable Pay:
Mark's Targets and Quotas:
Commission Rates:
SPIFF:
In Q1, Mark generates 120 SQOs, falling into Tier 1, and earns: 120 SQOs x $137 = $16,440 SQO Commission
He also generates $2.5 million in pipeline, earning: $2.5M x 0.18% = $4,500 Pipeline Commission
In Q2, Mark generates 50 SQOs (Tier 1) and $2 million in pipeline: 50 SQOs x $137 = $6,850 SQO Commission $2M x 0.18% = $3,600 Pipeline Commission
Additionally, one of Mark's deals closes, resulting in $50,000 ARR. He earns: $50,000 x 1% = $500 SPIFF
Mark's total variable earnings: Q1 Commissions: $16,440 + $4,500 = $20,940 Q2 Commissions: $6,850 + $3,600 + $500 = $10,950 Total: $31,890
With his $48,000 base salary, Mark's total compensation comes to $79,890.
Impact on Revenue:
A well-designed SDR compensation plan can have a significant impact on both the individual SDRs and the company as a whole:
Ready to motivate your SDRs to generate more qualified pipeline?
Download our "Land & Expand Compensation Plan for SDRs" template and start customizing it for your team today!
The four SaaS sales compensation plan examples we've explored demonstrate how to effectively incentivize and motivate your sales team based on their specific roles and responsibilities.
By tailoring your compensation plans to the unique needs of your Account Managers, Account Executives, Sales Development Representatives, and top-performing AEs, you can drive the right behaviors and achieve your organization's revenue goals.
When designing your sales compensation plans, consider the key components and impact on revenue for each role. Use the provided examples and templates as a starting point, and customize them to align with your company's specific objectives and sales cycle.
Remember, a well-designed sales compensation plan is a powerful tool for driving performance and growth. By investing the time and effort to create plans that motivate the right behaviors and reward top performers, you'll be well-positioned to attract and retain the best sales talent in the industry and achieve your revenue targets.
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