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copyright © 2009
Show Me the MoneyShow Me the Money
Incentive Compensation Plansfor
Service-Oriented Sales Teams
May 11, 2009 2copyright © 2009
ArgumentArgument
Imagine You’re a SaaS Vendor:
Base billed $13,000,000
Customer Churn is 2%
Revenue Plan is $16,500,000
Quota & Commissions to Make Plan
May 11, 2009 3copyright © 2009
Elephant & SquirrelElephant & Squirrel
The difference between
selling legacy software & selling SaaS
is the difference between
hunting elephants & shooting squirrels.
May 11, 2009 4copyright © 2009
CACCAC
• What Is Your Customer Acquisition Cost?
• Marketing = Advert, Brand, Lead Gen
• Sales = COGS (base + incentive)
May 11, 2009 5copyright © 2009
Target MarketTarget Market
SuspectProspectQualifyInteract
DemonstrateProposeCommit
Negotiate
LeadLead
Win
CustomerCustomer
Copyright © 2007 keychainlogic
Target MarketTarget Market
SuspectProspectQualifyInteract
DemonstrateProposeCommit
Negotiate
LeadLead
Win
CustomerCustomer
Copyright © 2007 keychainlogic
Tech Services Rev GenTech Services Rev Gen
May 11, 2009 6copyright © 2009
Target MarketTarget Market
SuspectProspectQualifyInteract
DemonstrateProposeCommit
Negotiate
LeadLead
Win
CustomerCustomer
Copyright © 2007 keychainlogic
Target MarketTarget Market
SuspectProspectQualifyInteract
DemonstrateProposeCommit
Negotiate
LeadLead
Win
CustomerCustomer
Copyright © 2007 keychainlogic
Tech Services Rev GenTech Services Rev Gen
May 11, 2009 7copyright © 2009
Accountability...Accountability...
“Customers are in control, [and] they are demanding … more accountability for results.”
– Ray LaneKleiner Perkins (former Oracle COO)“The Coming Service Revolution”
on SandHill.com, 2005
This idea is giving some ISVs heartburn.The rest are transitioning to SaaS.
May 11, 2009 8copyright © 2009
...for Results...for Results
May 11, 2009 9copyright © 2009
AccomplishmentAccomplishment
May 11, 2009 10copyright © 2009
Prospective
Customer
QualifyingQuestionnaire
Qualifying?
NoGo On to
the Next One
Yes
"Yes. Ask."Account
Plan Accurate?
NoTry Again
Yes
Signature
ServiceApplication
OK?
Try Again
Yes
SignatureProposal
DevelopmentRight
Track?
Yes
CoachingProposalRevision(s)
Agreement?
No
"Contract,please” Paperwork
SignedContract
Start Here
Implement
Copyright © 2006 keychainlogic
Prospective
Customer
QualifyingQuestionnaire
Qualifying?
NoGo On to
the Next One
Yes
"Yes. Ask."Account
Plan Accurate?
NoTry Again
Yes
Signature
ServiceApplication
OK?
Try Again
Yes
SignatureProposal
DevelopmentRight
Track?
Yes
CoachingProposalRevision(s)
Agreement?
No
"Contract,please” Paperwork
SignedContract
Start Here
Implement
Copyright © 2006 keychainlogic
Process?Process?
May 11, 2009 11copyright © 2009
• Sales must reflect service commitment
• Customers want problems solved quickly
• Demonstrate it with every step
A Sense of UrgencyA Sense of Urgency
May 11, 2009 12copyright © 2009
A Better ProcessA Better Process
Plan
Propose
Close
Implement
AccountPlan
ServiceApplication
Enrollment
Contract
Qualify
$$$
Copyright © 2006 keychainlogic
Plan
Propose
Close
Implement
AccountPlan
ServiceApplication
Enrollment
Contract
Qualify
$$$
Copyright © 2006 keychainlogic
May 11, 2009 13copyright © 2009
Comp ChallengesComp Challenges
• How is SaaS different?
• Where is SaaS similar?
• Possible Solutions?
May 11, 2009 14copyright © 2009
Challenging IdeasChallenging Ideas
Total Contract Value Plans
Annuity Plans
May 11, 2009 15copyright © 2009
Compensation PlanningCompensation Planning
• Involves several steps:
Plan
Objectives
Quota
Revenue
Documentation
Administration
May 11, 2009 16copyright © 2009
ObjectivesObjectives
Recall Your SaaS Scenario:
Base billed $13,000,000
Customer Churn is 2%
Revenue Plan is $16,500,000
May 11, 2009 17copyright © 2009
“The Rule of 78s”
Establish New Recurring Revenue
• The Magic of Compound Interest
• Leverage the Compounding Effect
May 11, 2009 18copyright © 2009
MRR Scenario:
• Last year, your company billed $13,000,000
• This year’s plan calls for 30% growth
• How much more must you bill each month?
“The Rule of 78s”
May 11, 2009 19copyright © 2009
Jan Feb Mar AprMay Jun Jul Aug Sep Oct
Nov Dec
“The Rule of 78s”
May 11, 2009 20copyright © 2009
Jan Feb Mar AprMay Jun Jul Aug Sep Oct
Nov Dec
“The Rule of 78s”
May 11, 2009 21copyright © 2009
$3,900,000 times =78Totals
50,000 time =1is billed50,000December’s
etc. throughout the year…
500,000 times = 10 is billed 50,000March's
550,000 times = 11 is billed 50,000February's
$ 600,000 times = 12 is billed $ 50,000January's
(($13,000,000 x 30%)=$3,900,000) ÷ 78 = $50,000
Quota
May 11, 2009 22copyright © 2009
A Simple RateA Simple Rate
Commissions = 62.5% of New MRR
62.5%Commission Rate
$120,000Total On-Quota Sales
75,000Targeted Commissions
75,000Base Salary
$150,000On-Target Earnings
May 11, 2009 23copyright © 2009
What Is Revenue?What Is Revenue?
• Billed Application Revenue
• Installation, Implementation, “Services”
• Renewals
May 11, 2009 24copyright © 2009
Theories of MotivationTheories of Motivation
May 11, 2009 25copyright © 2009
Theories of MotivationTheories of Motivation
May 11, 2009 26copyright © 2009
TweakingTweaking
• Bring Focus by Adjusting Base Rate:
• Committed Revenue?
• New Logos?
• Accelerated Growth?
May 11, 2009 27copyright © 2009
Calendar FriendshipCalendar Friendship
• Compounding effect• 1Q sales can be worth 5x 4Q sales
• Early start builds momentum
• But… Don’t get behind(It’s harder to make up)
May 11, 2009 28copyright © 2009
““Turbo Dollars”Turbo Dollars”
ACCELERATE GROWTH
Remove Earnings Caps
“The Sky’s the Limit”
May 11, 2009 29copyright © 2009
Documentation & AdminDocumentation & Admin
May 11, 2009 30copyright © 2009
TimingTiming
• Cash Is King
• Consider Payment Splits
• Incentive vs. Responsibility
May 11, 2009 31copyright © 2009
Thank YouThank You
contact:
Keychain LogicKen Boasso
