Dear SaaStr: Should We Pay Our Sales Reps on Renewals?

Q: Dear SaaStr: Should We Pay Our Sales Reps on Renewals?

Simple answer: most don’tYou can, especially in the early days.  But very few SaaS companies pay sales reps on renewals as they scale.  And you can definitely pay on upsells and account expansion.

Longer reason: most SaaS companies don’t pay AEs on renewals — because you want to specialize. We’ve all learned this over the past years in SaaS:

  • You want qualifiers qualifying — BDRs.
  • You want openers opening — SDRs.
  • You want closers closing — AEs.
  • You want retainers retaining — CS.
  • You want renewers renewing — CS or even Accounting, sometimes.
  • You want upsellers upselling — AM or sometimes AEs.
  • You want each rep only selling into the segments they are best at — so you segment your team into Small, Medium, and Field/Large prospects. And later maybe even into industries and verticals. And direct and indirect. Etc. etc.

Specialize, specialize, specialize. It’s much, much more efficient for skilled professionals to only be doing what they are best at. More leads close, faster. More renewals renew, faster. High NPS. Everything goes up and faster when folks are in their optimal role.

Of course, though, in the early days, this is impossible. 🙂 You don’t have the scale or the capital or the customer base.

But start as early as you can. And part of this is closers should be closing. Not renewing.

Having said that, in the early days:

  • If you and the team feel paying sales reps something on renewals will help — just do it, at least try it.  Many reps won’t even be there in 2 years; some won’t even be there in 1 year.  And it’s an experiment you can run, to see if it impacts behavior.
  • It’s pretty common for reps to own all new bookings on their accounts in the first 12 months after the deal closes, up until the renewal. That incents the right behavior.  And sometimes they can hold the account longer, too.  But that’s not the same as being paid a large commission just for renewing the deal at the same deal size.
  • Until you have a renewals team, or can handle it in ops or finance, your AEs may be the only ones to do it!  In which case, of course, you have to pay. 🙂
  • And it makes a ton of sense to let AEs own upsells in many cases, especially past a certain size of upgrade / upsell.  A great line many SaaS companies use is if an upsell is < 20%, let customer success just handle it via a standard form.  But if the deal size is growing > 20%, they have to bring sales in.  And sales gets a full commission.

But most reps won’t do much to earn that renewal on its own, and you’ll probably abandon that experiment within a year.  It’s better to focus that bonus money upfront, on higher commissions.  And let renewal folks and CS folks on the renewal at Year 2.

pay again image from here

Published on February 10, 2022

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