Sales Compensation in a Recurring Revenue Business
If you are helping with the design of the sales comp plans in a recurring revenue business, you may have your hands full. Are you serving as referee between advocates for ACV (annual contract value) and those supporting TCV (total contract value) as the correct measure of sales performance? Do you understand the relationship between MRR (monthly recurring revenue) and RR (recognized revenue) and how the magical number, 78, ties them together? And what about churn, term, and your cost of capital?
The world is discovering the magic of the recurring revenue business model. And you may be discovering the challenges of compensating sales people who are selling these deals. While many software companies are making their first forays into this area, other industries like telecommunication and waste management have been living there for decades, and have a great deal to teach us about what to measure, how to comp, and what to watch out for.
Check out this practical session that will provide a grounding in best practices for sales compensation plan design in a recurring revenue business. We look at the best primary measures of sales performance, and the necessary secondary measure. We consider common mis-steps in these plans from measuring on total contract value to long annuity “tails” on the comp plan.
You can create a terrific sales comp plan that focuses your sales people on the right sales at the right cost of comp for your business.
View the webinar below:
Additional Resources
We only had a chance to touch the surface during this webinar – there’s so much more to explore!
Helpful links and downloads:
- The presentation used in the webinar: 1707 Webinar – Recurring Revenue Sales Comp 170806 – this includes two further pages showing more about how Example #2 from the presentation works, at the end of the deck
- The best theoretical explanation of how to think about this topic I’ve seen, in a blog post by Joe York – click here (warning: this one is pretty technical)
- An example of a SaaS payout matrix that adjusts the payout rate based on term length and upfront payments by Philippe Botteri – click here
Donya Rose, CSCP, is Managing Principal of The Cygnal Group. She is a recognized expert in sales compensation plan design, regularly speaking at conferences and writing published articles. She serves clients from F500 to growth-stage businesses, and advises WorldatWork on sales compensation hot topics and best practices.