How is SaaS Sales Compensation Structured?
Before selecting a sales compensation plan, you must align your business objectives with the sales role you are hiring for. Suppose you can organize the many positions on your sales force into straightforward “bands” or levels of employee expertise. In that case, a well-structured pay plan will be clearer for average salary.
For instance, the majority of HR teams group new hires in their hiring funnel as follows:
Because it reflects the level of experience they possess, the pay scale for sales representatives differs depending on the band they fall within. The more specialized a sales agent is, the higher your chances are of meeting your company’s revenue objective, according to the practice of segmenting your sales hiring into sub-categories.
A successful sales compensation plan includes a generous performance-based variable pay component and balanced base pay. While the incentive component keeps your salespeople focused on their objective, the base pay gives them a sense of financial security.
For instance, most sales-driven SaaS businesses pay their sales representatives a fixed base salary plus (x)% of each done contract. Many of them provide a 50/50 split to maintain impartiality. Others increase the ratio of variable pay to base pay to reward strong performance.
Types of Roles
The annual average salary range for SaaS account executives is $60,000 to $500,000. What you ultimately earn relies on the following aspects:
- How much demand do your goods have?
- How well do you market your product?
- How much does your product cost?
- What is the breakdown of your basic pay and commissions?
Account Executive and its variations, such as Enterprise Account Executive, SMB Account Executive, etc., are the most typical job titles for this position.
Outside Sales Rep
Outside sales representatives pursue the most notable prospective customers of a corporation. Since they interact with their clients face-to-face rather than on the phone, they are considered to work “outside.”
A business in San Francisco might employ seasoned outside sales reps in cities like NYC, Chicago, etc., to chase business with firms there.
Outside sales representatives for SaaS businesses are often well compensated, with an average base income of roughly $50,000. However, with OTEs, they can earn between $150,000 and $300,000 per year (some can make up to $500k).
Cold calling and contacting numerous potential customers is the sales department representatives’ responsibility to promote awareness of the product and set up a meeting between the possible customer and a sales team member.
Usually, this position serves as a springboard toward a significant sales position. In the San Francisco Bay Area, salaries and commissions typically range between $50,000 and $80,000.
This position’s most typical job title is sales Development Representative (SDR) or Business Development Representative (BDR).
Post Sales Account Management
Account managers are responsible for following up with clients, training new client team members on how to use the product, and seeing possibilities for offers. In some teams, implementing these up-sell chances will be the responsibility of the Account Managers. As a result, they also conduct actual sales. SaaS Account Managers typically earn anywhere from $50,000 to $130,000.
VP of Sales
The primary responsibility of the VP of Sales is to develop a plan that will allow each salesperson to succeed. This could involve extending the product’s messaging strategies, choosing which clients to target, setting up the team across different industries, and much more. The sales leader will also be in charge of hiring and overseeing the entire sales team for a smaller firm. Holding salespeople responsible for quotas, coaching, training, etc., is necessary to achieve this.
A large company’s sales leader will oversee multiple sales managers while emphasizing strategy more than day-to-day administration. Additionally, sales leadership may roll up their sleeves and participate in some selling for significant and crucial deals. Although it’s uncommon, it does happen occasionally.
The pay for sales leadership varies significantly. At organizations like Oracle and IBM, high-level sales leadership probably makes close to seven-figure salaries. However, sales executives at startups that receive equity stand to profit handsomely if and when their business is acquired or goes public. If you get the job, you should be able to make at least $120,000 and possibly as much as $300,000.
The SDR Manager, who is in charge of the SDR team, is typically the first sales manager that a company will hire or promote. SDR Managers can make between $120,000 and $180,000 per year, including bonuses and commissions.
The sales crew splits into verticals as a company expands. These verticals can be categorized by industries or company size (SMB, Mid-Market, and Enterprise) (Insurance, Manufacturing, Retail, etc.). Every vertical frequently has a manager, and all these managers answer to the sales leader.
Sales managers put this approach into practice once sales leaders develop it for the sales force. They work with individual contributors to get the team to perform and use pressure, education, and encouragement.
There are typically two types of support workers for the sales team in SaaS organizations. Those employed in “Sales Operations” make up the first group.
Larger organizations may not have the resources for sales leadership to thoroughly examine the many methods used by the sales team. In this situation, the operations team will assess how the sales and pre-sales teams operate to maximize effectiveness. In essence, the operations staff is in charge of making sure everything runs properly. People who work in sales earn between $80,000 and $100,000 annually.
Sales engineers will accompany salespeople to customer meetings for businesses that offer sophisticated technical items to respond to specific client inquiries and conduct product demonstrations. These people frequently make as much money as software engineers, with yearly salaries ranging from $100,000 to $250,000.
What Are 5 Common SaaS Sales Compensation Models? See Below!
No base salary; commission only.
This model is excellent, particularly for startups. Mainly because you don’t receive much money (or any), and you can only compensate your sales representatives for customers who pay you. This strategy could be advantageous for your sales team members due to their increased independence and flexible work schedules. Their commission check will increase in size the harder and more intelligently they work.
However, finding contractors who are a good fit will be more challenging for your recruiter. The reason behind this is that positions that are commission-only do not ensure a set monthly salary. Only a few job seekers will accept to take this risk for this reason.
Base salary + commission
You will know how to budget your costs and provide your salesperson with a set amount in advance. Your sales representatives will feel more confident and secure because they won’t be starting the month with nothing and because new contracts will increase their compensation.
Moreover, base pay can occasionally be modest sums. Additionally, they frequently fail to draw qualified salespeople. You will have to reduce the commission rates if you raise the fixed wage. This strategy will work if your development is steady and predictable , and you can provide a respectable base salary.
This idea would appeal to any business. You don’t include charges for marketing, support, or other expenses when paying commissions to SaaS salespeople; instead, you pay them based only on net income. Your sales representatives should learn how to close more expensive deals and avoid offering discounts. Although, we should be aware that your profit will be much smaller than the size of the real deal. However, your staff will undoubtedly support your strategy if your sales force is closing deals worth $5–$6 million or your operational expenditures are modest.
In this scenario, you give SaaS salespeople X% commission if your sales team meets the quota and an increase in commission rate when they surpass said quota. You give them more rewards when they perform better. By rewarding high-performing sales representatives, you can encourage them to accomplish more for you. You provide them with increased commission rates when they surpass the monthly or quarterly quota.
The critical thing you should think about is learning how to set first and subsequent prices sensibly so as not to harm your company’s budget or the success of your team members.
Although it is less prevalent in the SaaS sector, subscription-based service providers generally consider it. You compensate your salespeople when your current customers renew their subscriptions and don’t churn.
As a result, you retain your customers and offer excellent customer service. If the sales team actively participates in the customer retention and helps the customer succeed, you can achieve that.
It makes little sense to reward your sales representatives if your marketing and success teams focus on client retention. They get paid for the original contract, and another section is in charge of keeping customers. Multitasking and adding more KPIs won’t make your closers more productive. Additionally, it may reduce their daily output and cause them to falter in all areas.