THE SOFTLETTER SaaS DIRECT SALES COMPENSATION & … · 2017-02-26 · benchmarks, metrics, and best practices information on compen-sating your sales force. The report covers everything

THESOFTLETTERSaaS DIRECT SALESCOMPENSATION &EFFICIENCYREPORT

The Softletter SaaS Direct Sales Compensation and Efficiency Re-port provides Software as a Service companies with up-to-date benchmarks, metrics, and best practices information on compen-sating your sales force. The report covers everything from base pay rates and variable compensation to sales close periods and yearly sales plan achievement.

The Compensation Report cross tabulates its summaries by cus-tomer revenue size, SaaS company revenue, and development stage. This enables you to compare your company’s performance and goals against similarly sized type and growth peers.

We are confident that The 2016 Direct Sales Compensation and Efficiency Report will be an invaluable part of your successful ongoing sales efforts.

Merrill R. (Rick) ChapmanManaging Editor, Softletter

Publisher & Managing Editor

Merrill R. [email protected]

Editor &VP of Research Publications

Randal J [email protected]

Editorial OfficeSoftletter

34 Sugar Hill RoadKillingworth, CT 06419

Voice: (860) [email protected]

www.softletter.com

Product Code: Aegis-0039-0916

1

The Softletter Direct Sales

Compensation and Efficiency

Report

2

THE SOFTLETTER DIRECT SALES COMPENSATION & EFFICIENCY REPORT

Copyright Notification and Restriction of Use

Copyright 2016 by Softletter. All rights reserved. This document may not be duplicated in any way without the express written consent of the author, except in the form of brief excerpts or quotations for the purposes of review or education. The contents contained therein is for the personal use of the purchaser and may not be incorporated in any commercial programs, other books, databases, software, electronic media, or uploaded or posted on any website or remote or local content repository without the express written consent of the publisher and the author. Translation of the contents into any ebook format or device is forbidden without the express written consent of the publisher and the author. Making copies of this report or any portion for any purpose other than your own is a violation of United States copyright laws.

Who Should Purchase

The Softletter Direct Sales Compensation and Efficiency Report?

The Softletter Direct Sales Compensation and Efficiency Report is intended be used and analyzed by senior managers at Software as a Service (SaaS) firms who are building or have created direct sales forces, which we define as sales personnel who regularly meet with prospects at their headquarters or related facilities during a sales cycle. This of course does not preclude the use of modern remote demo and display systems and technology, but in the vast number of businesses, particularly in “enterprise” markets, where a software service will be widely deployed and used person to person contact between the supplier of a service and the subscriber will need to occur before a sale closes.

Within your company, personnel with CEO, CSO (chief sales officer), VP of Sales, VP of Sales and Marketing, Director of Sales, and Sales Team Manager will find the report of critical use in building their sales force, analyzing performance, and setting sales goals and creating sales plans.

While the Report does not specifically target SaaS companies whose sales model is structured around telesales activities, most of its findings can be quickly extrapolated to telesales compensation and management.

3

THE SOFTLETTER 2016 DIRECT SALES COMPENSATION & EFFICIENCY REPORT

Introduction and Methodologies 9

Company Profiles and Demographics 11

Company Development Stage ...................................................................................................................11Company Revenues .......................................................................................................................................12What Is the Primary Market for Your Software and Services? .........................................................13What is the average revenue size of the companies who purchase your software and servic-es? .............................................................................................................................................................................. 14

Sales Force Organization and Basic Performance 16

Do you sell your software/services via a direct sales force? ............................................................16Do you sell your software/services via a direct sales force Xtab Revenue .................................17Does your company have a separate sales team responsible for renewals? .............................18How is your sales force primarily organized? ........................................................................................19How is your sales force primarily organized? Xtab Company Revenue .....................................20How is your sales force primarily organized? Xtab Revenue ..........................................................21How is your sales force primarily organized? Xtab Development Stage ...................................22On average, how long does it take for a new direct sale to close? ...............................................23On average, how long does it take for a new direct sale to close? Xtab Company Revenue .. 24On average, how long does it take for a new direct sale to close? Xtab Revenue .................25On average, how long does it take for a new direct sales person to close their first sale? ..26On average, how long does it take for a new direct sales person to close their first sale? Xtab Company Revenue .........................................................................................................................................27On average, how long does it take on average for a new direct sales person to make their first sale? Xtab Development .............................................................................................................................28How soon do your direct sales personnel receive their variable compensation after the close of a sale? .............................................................................................................................................................29How soon do your direct sales personnel receive their variable compensation after the close

4


of a sale? Xtab Company Revenue ...........................................................................................................30How soon do your direct sales personnel receive their variable compensation after the close of a sale? Xtab Revenue ...............................................................................................................................31

Quota and Direct Sales Representative Compensation 34

If your direct sales representatives reached their sales targets, quota’s and/or bonuses as pre-scribed, what is their annual total “on target earnings” or OTE (including base salary and all other money payments)? .............................................................................................................................34If your direct sales representatives reached their sales targets, quota’s and/or bonuses as pre-scribed, what is their annual total “on target earnings” or OTE (including base salary and all other money payments)? Xtab Company Revenue ...........................................................................35If your direct sales representatives reached their sales targets, quota’s and/or bonuses as pre-scribed, what is their annual total “on target earnings” or OTE (including base salary and all other money payments)? Xtab Revenue ...............................................................................................36Which direct sales count towards your representatives quota/personal sales goals? ...........37Which direct sales count towards your representatives quota/personal sales goals? Xtab Com-pany Revenue ...................................................................................................................................................38Are your direct sales representatives measured and compensated for maintaining customer satisfaction with existing accounts?.........................................................................................................39Are your direct sales representatives measured and compensated for maintaining customer satisfaction with existing accounts? Xtab Revenue...........................................................................40Please provide the average percentage of your direct sales rep’s compensation that is tied to maintaining customer satisfaction with existing accounts? ...........................................................41Please provide the average percentage of your direct sales rep’s compensation that is tied to maintaining customer satisfaction with existing accounts? Xtab Company Revenue .........42Please provide the average percentage of your direct sales rep’s compensation that is tied to maintaining customer satisfaction with existing accounts? Xtab Revenue .............................43What is the primary compensation method for your sales representatives?............................44What is the average yearly sales quota assigned to your direct sales representatives who re-ceive a base salary plus commissions? ....................................................................................................45What is the average yearly sales quota assigned to your direct sales representatives who re-ceive a base salary plus commissions? Xtab Company Revenue ..................................................46

5


What is the average yearly sales quota assigned to your direct sales representatives? Xtab Company Revenue .........................................................................................................................................47What is the average yearly base salary of your direct sales representatives who are compen-sated via a base salary and commission? ...............................................................................................48What is the average yearly base salary of your direct sales representatives who are compen-sated via a base salary and commission? Xtab Company Revenue .............................................49What is the average yearly base salary of your direct sales representatives who are compen-sated via a base salary and commission? Xtab Revenue .................................................................50When you pay variable compensation(commissions) for new SaaS business, on what basis is your direct sale force paid? ..........................................................................................................................51When you pay variable compensation(commissions) for new SaaS business, on what basis is your direct sale force paid? Xtab Company Revenue .......................................................................52When you pay variable compensation(commissions) for new SaaS business, on what basis is your direct sale force paid? Xtab Revenue ............................................................................................53What is the average variable commission compensation paid to your sales representatives who also receive a base salary?..................................................................................................................54What is the average variable commission compensation paid to your sales representatives who also receive a base salary? Xtab Company Revenue ...............................................................55What is the average variable commission compensation paid to your sales representatives who also receive a base salary? Xtab Revenue....................................................................................56If a direct sales representative being paid on a base plus commission basis exceeds quota, how are they typically compensated? ...............................................................................................................57Please indicate below how much increase in maginal commission payments a sales represen-tative receives as compensation for their exceeding quota. .........................................................58Do you cap the sales commission’s of direct sales representative being paid on a base plus commission basis? ..........................................................................................................................................59Do you cap the sales commission’s of direct sales representative being paid on a base plus commission basis? Xtab Revenue ............................................................................................................60What is the average yearly base salary of your direct sales representatives who are compen-sated via salary only? ....................................................................................................................................61What is the average yearly base salary of your direct sales representatives who are compen-sated via salary and incentive bonus (es)? ............................................................................................62For base salary plus incentive bonus(es) payment, what is your primary method of paying a bonus? ...............................................................................................................................................................................63

6


Please enter the average variable commission compensation paid to your direct sales commis-sion-only representatives ............................................................................................................................64If a direct sales representative being paid on a commission-only basis exceeds quota, how are they typically compensated? ...............................................................................................................65Sales Plan Performance and Metrics ........................................................................................................67 Did you meet or exceed your yearly direct sales plan? ....................................................................67Did you meet or exceed your yearly direct sales plan? Xtab Company Revenue ...................68Did you meet or exceed your yearly direct sales plan? Xtab Revenue .......................................69By what percentage did you exceed your direct sales plan? ..........................................................70By what percentage did you exceed your direct sales plan? Xtab Company Revenue ........71By what percentage did you exceed your direct sales plan? Xtab Revenue ............................72How often does your company change its direct sales compensation plan?...........................73How often does your company change its direct sales compensation plan? Xtab Company Revenue ..............................................................................................................................................................74How often does your company change its direct sales compensation plan? Xtab Revenue 75Are direct sales managers measured and rewarded based on meeting and exceeding direct sales targets? ....................................................................................................................................................76Are direct sales managers measured and rewarded based on meeting and exceeding direct sales targets? Xtab Company Revenue ..................................................................................................77Are direct sales managers measured and rewarded based on meeting and exceeding direct sales targets? Xtab Revenue ......................................................................................................................78What percentage of a direct sales manager’s overall compensation is tied directly to their sales team’s performance? ....................................................................................................................................79What percentage of a direct sales manager’s overall compensation is tied directly to their sales team’s performance? Xtab Company Revenue ...................................................................................80How frequently are direct sales targets set and measured? ............................................................81How frequently are direct sales targets set and measured? Xtab Company Revenue .........82How frequently are direct sales targets set and measured? Xtab Company Revenue .........83What percentage of your total direct sales is achieved by the top performing 20% of your rep-resentatives? .....................................................................................................................................................84What percentage of your total direct sales is achieved by the top performing 20% of your rep-resentatives? Xtab Development Stage .................................................................................................85What percentage of your total direct sales is achieved by the top performing 20% of your rep-resentatives? Xtab Revenue .......................................................................................................................86

7


Sales Force Tools and Incentive Programs 88

Do you use sales compensation software such as Callidus, Xactly et al to manage your sales compensation payments? ...........................................................................................................................88Do you use sales compensation software such as Callidus, Xactly et al to manage your sales compensation payments? Xtab Company Revenue .........................................................................89Please tell us what sales compensation software you use you use sales compensation software such as Callidus, Xactly et al to manage your sales compensation payments? .......................90Please rank your satisfaction with your current sales compensation software ........................91How do you manage configuration, pricing and quoting for your sales force?.......................92How do you manage configuration, pricing and quoting for your sales force? Xtab Company Revenue ..............................................................................................................................................................93Please tell us what CPQ software you use you use for quoting and configuration manage-ment. ....................................................................................................................................................................94When hiring new sales representatives, how do you recruit and hire? (Please check all that ap-ply). .......................................................................................................................................................................95What is your predominant method of hiring sales personnel? ......................................................96Upon hiring, what methods do you use to train and prepare your newly hired sales reps? (Please check all that apply) is your predominant method of hiring sales personnel? ........................97Do you have an ongoing sales training program? ..............................................................................98How often are sales personnel required to be trained? ....................................................................99Does your company use sales consultants and/or sales engineers (SEs) to assist sales represen-tatives with customer demonstrations, answer technical questions, etc? ...............................100What is the ratio of sales consultants / engineers to sales representatives? ...........................101Does your company offer a “President’s Club” or similar annual trip to members of the sales team for meeting 100% or higher achievement of quota? ...........................................................102 What is the average budget or cost of the “club” incentive per sales person? .......................103

8


The SofTleTTer DirecT SaleS com-penSaTion & efficiency reporT

The Softletter Direct Sales Compensation &

Efficiency Report

9

THE SOFTLETTER SaaS DIRECT SALES COMPENSATION & EFFICIENCY REPORT

Introduction and Methodologies

The Softletter SaaS Direct Sales Compensation and Efficiency Survey was launched in March 2016 and closed at the end of June. The MatrixCX (www.allegiance.com) was used to generate and manage the project. The purpose of this survey was to develop a comprehensive analysis of current practices in Software as a Service (SaaS) direct sales compensation and success benchmarks. This survey asked respondents answer 47 detailed questions to provide us with an up-to-date snapshot of their sales compensation practices, results and measurements and generated 258 valid responses. The single largest group, 46% of respondents, reported their title as Owner, Founder, President, or CEO of their respective companies. This was followed by 20% identifying themselves as Vice President, Executive Vice President of Sales or Sales and Marketing. The balance were senior sales managers, Directors, COO’s or other mid-level management positions responsible for sales and/or sales compensation within their companies. Twenty percent of the firms taking the survey were international, with representation primarily from Canada and EU countries. These numbers are very much in line with our previous results.

An important point we wish to make is that after years of analysis and research, we have discovered sales compensation numbers do not change dramatically over time, though certain metrics change in response to industry shifts. We are aware that new sales methodologies, books, and “breakthroughs” are being introduced on a constant basis to replace the previous new sales methodologies, books, and “breakthroughs.” SaaS may indeed reduce the time and resources a direct sales representative spends at a prospect’s location working on closing a deal. There’s no question that potential subscribers are taking advantage of online resources and social networking to educate themselves about SaaS prices and system effectiveness. But nothing in our numbers indicates that direct sales is going away, particularly in larger and “enterprise” situations. Before contracts are signed and checks written, the need for personal sales management and contact remains vital.

Yes, there are some prominent SaaS companies that have noisily proclaimed that they have no sales department. You can get away with this if your product depends highly on connectivity and can scale virally. But inevitably, as your company grows, larger potential customers appear, and at that point, so does a VP of Sales and your direct sales force. There are no exceptions and all the firms with no sales department always acquire one eventually.

Throughout this report numbers of particular interest have been bolded. Decimals have been rounded off and percentages may not equal 100%. Many of these answers have been broken down into cross tabs for further detailed analysis. The three primary cross tabs we used were company development stage, revenue size of a SaaS firm’s customers, and revenue size of the SaaS company. Where a question does not provide any significant insight from a cross tabulation, only the summary results are shown.

10

Company Profiles and

Demographics

11


Company Profiles and Demographics

Company Development Stage

No significant customer revenue 13%

Privately owned, privately funded 57%

Privately owned, venture funded 11%

Public 20%

The number of companies reporting they are publicly owned is very significant. In 2009, in the first version of this report, the number of Respondents listed as publicly owned was 3%. In the intervening years, SaaS has replaced the desktop and on premise software models as the dominant industry model, with a corresponding rise in the number of com-panies taking advantage of public markets.

13%

57%

11%20%

No significant customerrevenue

Privately owned,privately funded

Privately owned,venture funded

Public

12


Company Profiles and Demographics

Company Revenues

Under $1 million 28%

$1 to $5 million 30%



$100 million+ 17%

The distribution of companies by company revenues continues the trend of the num-ber of companies reporting revenues $100 million+ continues. This is an indicator of the growth and acceptance of SaaS.

28%30%

17%

8%

17%

Under $1 million

$1 to $5 million

$6 to $25 million

$26 to $100 million

$101 million+

13


25%

16%3%

22%

12%

16%

6%

180+ days

151 to 180 days

121 to 150 days

91 to 120 days

61 to 90 days

31 to 60 days

Under 30 days

Sales Force Organization and Basic Performance

On average, how long does it take for a new direct sales person to close their first sale?

Under 30 days 6%

31 to 60 days 16%

61 to 90 days 12%

91 to 120 days 16%

121 to 150 days 3%

151 to 180 days 16%

180+ days 25%

Note the aggregated numbers for the two highest cohorts in this question, two good rea-sons to avoid high churn rates in your sales department.

14


Sales Force Organization and Basic Performance

On average, how long does it take on average for a new direct sales person to close their first sale?...Continued Xtab Company Revenue

croSSTab: cuSTomer company revenue

buSineSSeS $101m+

miD markeT $10m+

Small buSineSSeS <$10m GovernmenT

180+ days 42% 25% 0% 60%151 to 180 days 17% 25% 10% 22%121 to 150 days 8% 13% 0% 22%91 to 120 days 8% 24% 30% 7%

61 to 90 days 7% 14% 20% 0%

31 to 60 days 18% 0% 20% 0%Under 30 days 0% 0% 20% 0%

Note the 42% reporting 180+ days in Businesses $101M+. When dealing with larger com-panies, longer sales cycles are expected. However, in on premise sales, large deals often extended over 18, 24, and even 36 months. In previous survey,s we provided these options, but stopped because the number of companies reporting yes to larger periods dropped off close to zero in SaaS.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

180+ days 151 to 180days

121 to 150days

91 to 120days

61 to 90days

31 to 60days

Under 30days

Government

Small businesses <$10M

Mid market $10M+

Businesses $101M+

15


Quota and Direct Sales Representative Compensation

Please provide the average percentage of your direct sales rep’s compensation that is tied to maintaining customer satisfaction with existing accounts?

Less than 10% 40%

10 to 25% 59%

26 to 50% 1%

These results tend to bear out our previous observations on hunting vs. farming in SaaS. In the survey, we did provide for further ranges, but the drop off after 26%+ was complete across all cross tabulations.

40%

59%

1%

Less than 10%

10 to 25%

26 to 50%

16



Please provide the average percentage of your direct sales rep’s compensation that is tied to maintaining customer satisfaction with existing accounts?...Continued Xtab Revenue

croSSTab: revenue $101m+ $26 To $100m+ $6 To $25m $1 To $5m+ unDer $1m

Yes 10% 13% 21% 25% 30%

No 90% 87% 62% 50% 45%

Partially, support organization has primary responsibility

0% 0% 17% 25% 25%

Partially, support organization has secondary responsibility

0% 0% 0% 0% 0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$101M+ $26 to$100M+

$6 to $25M $1 to $5M+ Under $1M

Partially, support organization hassecondary responsibility

Partially, support organization hasprimary responsibility

No

Yes

17



What is the average yearly base salary of your direct sales representatives who are compensated via salary only?

$30,001 to $50,000 45%

$51,001 to $75,000 63%

$76,001 to $100,000 2%

All the companies who answered this question were distributed equally between $1 to $5 million and $6 to $25 million in revenue and most were B2C. The salary-only model is not a good fit to SaaS (or any type of software firm) as it removes all incentive for increased performance. In fact, some additional research by Softletter personnel reveals that several of the “salary-only” companies actually incent their sales people with a variety of bonuses and incentives. We have not cross-tabbed this answer because of the low response rate.

45%

63% 2%

$30,001 to $50,000

$51,001 to $75,000

$76,001 to $100,000

18

Sales Plan Performance and Metrics

19


Sales Plan Performance and Metrics

Did you meet or exceed your yearly direct sales plan?

No, we did not meet our sales plan 49%

Yes, we met but did not exceed plan 25%

Yes, we exceeded our sales plan 26%

In our first sales report in 2009, 63% of respondents did not meet their sales plan goal.

49%

25%

26%

No, we did not meetour sales plan

Yes, we met but didnot exceed plan

Yes, we exceeded oursales plan

20

Sales Force Tools

and Incentive Progams

21


Sales Force Tools and Incentive Programs

Do you use sales compensation software such as Callidus, Xactly et al to manage your sales compensation payments?

Yes 27%

No 73%

We are a little surprised the number of companies reporting Yes was not higher. How-ever, the following cross tab shows that companies with larger customers and thus more complex sales processes are the main consumers of sales compensation management software. Softletter advocates that SaaS firms adopt the use of these tools as soon as ap-propriate in a company’s growth as they greatly help establish standardized and transpar-ent compensation processes. These are important in keeping your sales group focused on meeting your plans and goals, and decreases the amount of time spent by your reps on checking their “shadow” sales compensation spreadsheets. (And they all have those spreadsheets.)

27%

73%

Yes No

Documents

THE SOFTLETTER SaaS DIRECT SALES COMPENSATION & … · 2017-02-26 · benchmarks, metrics, and best practices information on compen-sating your sales force. The report covers everything