Inside sales is rapidly becoming the go to sales model for Software-as-a-Service (SaaS) companies. More startups are following modern selling models like Predictable Revenue where a heavy emphasis is placed on efficient emailing and calling while using the web to help make appointment setters much more effective. After the appointment setter tees up the demo for the inside sales rep, the inside sales rep takes over all the way to close.
One of the things I like to do is to learn about the sales compensation models of other startups, especially the base salary and variable compensation from commission, which when combined equals the sales person’s on target earnings. After that, I’ll ask about quota in terms of annual recurring revenue to get a feel for expectations.
Almost always, the annual recurring revenue quota for a SaaS inside sales rep is roughly 3x their on target earnings.
Here are some examples:
- $30,000 base salary with $30,000 commission target ($60k OTE) results in an annual quota of $180,000 in new recurring revenue
- $50,000 base salary with $50,000 commission target ($100k OTE) results in an annual quota of $300,000 in new recurring revenue
Now, most quotas are based on new annual recurring revenue and very little of quota is based on one-time professional services revenue, which is common with SaaS businesses. The next time you’re thinking through quotas for SaaS inside sales reps consider the 3x rule.
What else? What are your thoughts on the 3x rule for SaaS inside sales rep quotas?