David Cummings on Startups

Inside Sales Rep Comp Model for Startups

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David Cummings

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Most B2B SaaS startups should start with an inside sales rep model. The idea is that a consultative inside sales model is significantly less expensive when compared to a traditional enterprise field rep model. Prospects still need to talk to a knowledgeable sales person to help them make a decision.

When thinking about the inside sales rep compensation model, I like to have the majority of the comp be the commission with a common split being 40% salary and 60% commission. Here are some ideas when thinking about the inside sales representative compensation model in a startup:

  • Base salaries in the range of $25k – $50k
  • Commissions in the range of $25k – $60k (e.g. $40k base salary and $60k in commission for an on-target earnings of $100k)
  • Commissions would be 10% – 20% of first-year’s revenues (e.g. $1,000/month SaaS product is $12,000/year with a 15% commission would be an $1,800 commission)
  • Commissions should be paid out after the customer’s payment has been received by the startup

Sales rep comp should align closely with the interests of the startup and be win-win for everyone.

What else? What are some other thoughts on inside sales rep comp models in startups?

Comments

4 responses to “Inside Sales Rep Comp Model for Startups”

  1. John Ribbler (@ribblog) Avatar
    John Ribbler (@ribblog)

    David,

    The model that you have outlined is excellent and clearly based on experience, including trial and error.

    The challenge for many founders — especially if their backgrounds are in established organizations and industries — is resisting pressure to engage top producers with deep contacts “we must tap to be taken seriously.”

    The advantages of the kind of top-notch inside consultative sales team that you describe go way beyond cost for a company creating a new brand and culture.

    However, delivering the processes, tools and leadership needed to make it work is much more complicated and time consuming, than giving the responsibility to a few experienced professionals.

    John Ribbler

    Reply
  2. Dominique Levin (@totango) Avatar
    Dominique Levin (@totango)

    David,

    What I am most interested is figure out how to align the commission component with a subscription based model (that is a month-to-month, rather than an annual contract). Do you have any thoughts on this? Do you pay a percentage of MRR or some other?

    Reply
    1. David Cummings Avatar
      David Cummings

      One option that I’ve heard is successful is to pay 50% of the first four months of payment to the sales rep after payment is received by the company. The idea is to align the company’s interests with the sales’ reps interest during the period of time that a new client needs to stay to be successful.

      Reply
  3. SaaS Sales Compensation Best Practices

    […] October 2011 – David Cummings on Inside Sales Rep Comp Model for Startups […]

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