Hiring & Retention

Money, Bonuses, “Customers That Waste My Time”, and Greed: You Get What You Pay For

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Jason Lemkin

Screen Shot 2013-09-08 at 7.15.00 PMThere was one thing prospective sales reps would say in an interview that always chilled my spine.  It would especially come from sales reps from larger companies in high-velocity in-bound environment (e.g., WebEx-type environments).  They’d say this:  “Those type of leads just Wasted My Time.”

Sigh.

Yes, I guess it’s technically true.  If you’re a SaaS sales rep with a $500k annual quota, doing $5k ACV deals … you have to close 100 deals a year.  That probably means 400 demos.  And 2,000+ calls.  I mean, yes, some of those Marketing Qualified Leads will just waste your time.

But I knew this was the wrong way to build a customer-centric company.

There was another one I hated on the Customer/Client Success side.  And that was customer success managers who were really just farmers — compensated 100% or close to it for Upsells, not Retention.

These guys — I don’t know.  A lot of them are smarmy.  Because they call into all their accounts, yes.  But as soon as they don’t see any easy extra revenue out of them … they bail.  They don’t really help the account that is 100% penetrated.  So do you need another entire team there to manage the fully penetrated accounts?  Maybe.

I don’t have the perfect answers here.  But there are two things I’ve learned and to think about:

  • First, You Get What You Pay For in Sales and Customer Success.  If you incent behavior, you get that behavior.  I know you know that.  But think about it at a deeper level.   Recently I met with a couple of great SaaS founders, paying their sales reps $60k total a year, with minimal bonuses.  They thought that kept it scrappy, and everyone on the same page.  And you know what those guys close?  Nuttin’.
  • Second, Like it or Not, There is A Natural Order to Things.  If you don’t have a sales background yourself, you probably aren’t 100% comfortable with the tensions and incentives in commission-based structures.  You want everyone rowing together, not worrying too much about cash or equity, just building a great product.  You’ll want people to wear two hats — Sales and Customer Success.   You’ll hate the idea of a sales rep EchoSigning a contract, and then fading to dark, never to be heard from again by the customer.

But it turns out folks on the revenue side do need to be somewhat highly specialized.   Even once you just get to say $4m in ARR, you’re going to need a village — and you’re going to have to incent them all properly:

  • Incent Your Head of Marketing to Deliver His/Her Lead Commits Each Month, Growing 1X% MoM.
  • Incent (probably entry-ish level) lead qualification reps in both marketing and sales functions to qualify leads for Sales.
  • Incent Sales Reps to close leads, but also give them the compensation to properly treat the prospective customers with respect.  More here.
  • Incent Your Head of Sales to drive to a meaningful, high-growth, but ultimately attainable target.  Make it too high and he or she will blow up or fail.  Too low, or too squishy — and the results will likely be too low or too squishy too.
  • Incent Your Customer Support Team to have as many positive customer resolutions as possible.  Best efforts isn’t good enough.
  • Incent Your Customer/Client Success Team to both maximize renewals, and maximize upsells, and route the right upsells back to sales.  More here.
  • Incent Your Product and Engineering Teams to solve critical customer demands on time.

We’ve talked about some of these incentive structures before.  I’ve shared our sales comp plan here, which I think incented spending more time with prospects.  And we talked here a bit about incentives for Client/Customer Success.  And we’ll talk more here.

My uber-point is just this.  You need to incent all of them.  And properly.  Squishy goals don’t work in general.  And they fail 100% in revenue-related roles.   Commission them all, one way or another.  I’m shocked at companies that are even at $10m, $20m in some cases even $100m or more in ARR that have misguided or nonexistent commission plans, especially for non sales reps.  I know a senior executive at a SaaS company doing more than $200m a year that closes huge customers together with the VP Sales, often dragging the VP Sales along — yet has no incentive plan.  No bonus.  Boo.

This, my friends, once you are past $1m or $2m in ARR at least — is an Epic Mistake.  You may well survive with suboptimal incentives.  Even on salaries alone.  But get the incentives right, and you maximize your revenue per lead, revenue per account, and quality of customer experience.  Don’t invest here, and you’re squandering the opportunity to maximize the fruits of all your hard labors.  And that’s a huge shame.

Because if you can grow an extra 10-20% a year by aligning incentives, that will compound into something far, far better than you’d have otherwise.  SaaS Compounds.  Your job is to maximize the rate at which it does.

Published on September 8, 2014
  • Big agree Jason. Every time I tried to make hunters do the gardening job turned out to be a problem. Which is kinda hard to readjust with 150sales people. But, what I would stress is that you need to incentivise all of them and you do it in order to orchestrate their team work. There is no too many worse scenarios, than you acquire a customer, success team doesn’t take him properly and you loose a customer. He is very unhappy because from the way you treated him during the sales process he thought it would be GREAT, but is was lame; and then goes on telling everyone.
    Also, I like to measure the success of farming team and actually overall company by number of clients that are actually referred to us by others.

  • These are pointers that need to be followed by B2B SaaS CEOs without thinking twice.. They can play around with a bit but this here is what an efficient sales engine core would look like.. Thank you for sharing!

  • Great article Jason. I’m always amazed the amount of money companies invest in compensation without enough thought (and data) into who to incent and how to incent them!

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