Dear SaaStr: What’s the Best Way to Build a Comp Plan for Account Managers Focused on Upsell?
Building a commission plan for Account Managers (AMs) is a bit different than for AEs (Account Executives) because AMs are typically focused on retention, expansion, and upsells rather than net-new sales. The key is to align their incentives with the outcomes you want: happy customers, low churn, and growing accounts. Here’s how I’d approach it:
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Base Salary + Commission Structure:
AMs need a solid base salary because their role is more relationship-driven and less transactional than AEs. A typical split might be 70% base and 30% variable. The variable portion should be tied to measurable outcomes like net retention, upsell revenue, and customer satisfaction. -
Tie Commission to Net Revenue Retention (NRR):
NRR is the gold standard for AM performance. If an AM can retain 100% of their accounts and grow them by 20%, they’ve hit 120% NRR. You can structure their commission so they earn more as they exceed 100% NRR. For example:- 90%-99% NRR = 50% of target -100%-110% NRR =100% of target
- 110%+ NRR = Accelerators kick in (e.g., 150% of target for every dollar above 110%).
This ensures AMs are motivated to retain and grow accounts, not just maintain them.
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Incentivize Upsells and Cross-Sells:
AMs should earn commissions on upsells and cross-sells, but at a lower rate than AEs. For example, if AEs earn 20%-25% of ACV on new deals, AMs might earn 10%-15% on upsells. This keeps the focus on retention while rewarding growth. -
Customer Satisfaction Bonuses:
If you’re tracking customer satisfaction (e.g., NPS or CSAT scores), consider tying a small bonus to these metrics. For example, if an AM’s accounts average an NPS of 70+, they get a quarterly bonus. This aligns their incentives with long-term customer happiness. -
Clawbacks for Churn:
To avoid rewarding AMs for short-term gains that lead to long-term churn, implement clawbacks. If an account churns within 12 months of an upsell, claw back for the commission paid on the upsell. This ensures AMs are incentivized to focus on long-term account health, not just short-term revenue. -
Keep It Simple:
The plan should be easy to understand and calculate. AMs should know exactly how much they’ll earn for hitting their targets. Avoid overly complex formulas or metrics that require a finance degree to decipher. -
Accelerators for Top Performers:
Reward AMs who exceed their targets with accelerators. For example, if an AM’s upsell revenue target is $500k and they hit $600k, pay them an extra 20%-30% on the additional $100k. This motivates them to go above and beyond.
Ultimately, the best commission plan aligns AM incentives with company goals—retention, growth, and customer satisfaction—while keeping costs manageable. If you’re early-stage, you might need to tweak the percentages based on your unit economics, but the principles remain the same. AMs should feel like they’re winning when the company wins and are incentivized to build long-term relationships with customers. If you’re scaling, revisit the plan every 6-12 months to ensure it still aligns with your growth stage and goals. Simplicity and alignment are key.
