Is SaaS Really That Lucrative?

It can be if you are very good at it (like many things).

Why? Well, SaaS combines three things that make it attract for salespeople:

  • Most SaaS products need salespeople. Some freemium products don’t use salespeople, but probably 90% of applications do. Most SaaS products are solution sales and prospects and customers want to talk to someone about the needs and problems. More here: Curse of the ‘Middlers’: Why Happiness Officers Can’t Stand In for True Sales Professionals | SaaStr
  • High-growth SaaS products can afford to invest, because customer lifetimes are long. Since customers can last a decade or longer in SaaS, it makes sense to invest more heavily in sales (and marketing); More here: The 11 Year Customer | SaaStr; and
  • The margins in software are high. It does not cost a lot to deliver software as a service in most cases. The server costs are low for each incremental customer.

In sales in general (not just SaaS), salespeople often take home 15–20% of the margin on a product, the profit. Car salespeople make 15–20%, as do SaaS salespeople. But because the gross margins are so high in SaaS (vs. say a car), salespeople can take home almost that full 15%-20% of each deal in salary + commissions. Sometimes more.

Close a lot, e.g. $750k-$1m or more a year, and you can make pretty good money in SaaS sales.

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Published on June 16, 2019

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