Ask HN: SaaS contract commissions? Whats standard? | Hacker News Reader

Ask HN: SaaS contract commissions? Whats standard?

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I run a software company which sells our software as a service to other businesses.

I am wondering what is considered a standard commission rate in the SaaS world? If one of my salesman/woman is able to get a contract signed, what percentage of that contract should I give to them?

It's important to keep in mind when considering this, that in this situation, these salesman/woman aren't employees of mine. They are experts in their field who have connections within their industry, and have agreed to sell my product for a commission. They are not just random salesman, but rather, they are able to make sales because they have relationships/connections with the companies whom they are selling to. I am not paying them a salary, they are strictly selling my software and I give them a commission. I want to make sure the percentage I give them for each sale is fair, but I have very little knowledge of what is "fair".

So this is a hard thing to answer without knowing the value of the plans and a bunch of other parameters, like customer lifetime value etc. I have done these plans for my own companies and prior clients though so have some direct experience. For my old company as an example, our standard monthly/annual plans were not super expensive so honestly no commission on any of the low end plans was enough to incentivize sales staff (internal or external) to sell. Counter to that, our enterprise sales plans (mostly done in house) were large enough that we couldn't use the same incentive as the small plans.

Essentially what we came up with (for that product) was for the lower value plans we paid the equivalent of 6 months of revenue to the salesperson, for enterprise plans they were paid a percentage of the annual value (enterprise were all annual contracts with varied rates). Outside sales were not given any residuals for either sale as we had internal customer support and management. Internal sales people (as we grew) were eligible for enterprise residuals where/when they managed the client.

I have seen lots of other methods, but generally it boils down to what you can afford as a cost of acquisition and the lifetime value of the customer. Typically I'd base the incentive plans on the lifetime value of the customer, knowing that there is a law of averages, e.g. the company will win on some, lose on others, same for the sales person. There are a lot of factors to consider though so you need to build a basic financial model to understand it all. You can find a number of decent SaaS financial model templates which can help with this kind of planning online.

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