by Snapper Ussery
A high-performing sales team is key to growing SaaS revenue, and there’s a lot to consider when designing the optimal sales team for the job. Here’s a common-sense approach to thinking through roles, responsibilities and compensation needed to create a successful business model…
BDRs, SDRs, AMs – which one does your business need?
First, let’s define these acronyms: a BDR is a Business Development Representative; a SDR is a Sales Development Representative; and an AM is an Account Manager.
A BDR’s main objective is to create outbound sales opportunities. This could be obtained through cold calling, cold emails, networking and social selling. A BDR needs to have great time management and communication skills as they are responsible for finding the leads, nurturing the leads, selling the leads and, often, onboarding them as new clients.
An SDR is mainly focused on inbound leads. These leads could have completed a client intake form on a company’s website, responded to an email campaign or been referred from another client.
An AM is an Account Manager, sometimes referred to as a Customer Success Manager. An AM’s focus is to nurture the existing client base. AMs consistently work with the client base to make sure they are getting the most use out of their product. Many times, AMs produce referrals and up-sell or cross-sell opportunities for the sales team. The AM’s main objective is churn mitigation. Once a client is landed, it is the AM’s objective to keep them a client as long as possible.
The product or service you provide will dictate which of these roles you need. If you have a low-priced, low-MRR product, a SDR might be all you need. If you are in an industry that is highly competitive or have products that produce higher MRR, having both BDRs and SDRs, plus an AM might be necessary. Obviously, the company’s annual growth goals can help point to the size and scope of the team.
Create a pay-for-performance culture
When determining compensation for sales staff, focus the pay on the role’s responsibilities. Sometimes organizations add different variables that aren’t in the employee’s primary job scope, which shifts focus to other activities that keep them from achieving their main tasks. The main focus for SDRs and BDRs is to generate new business, so these individuals should be paid on new business. AMs or CSMs are paid to retain business, so monthly or quarterly retention tiers should be setup for these roles. Keep in mind that a commission plan, if created correctly, will drive the desired behavior from the sales team. So if new business is the desired behavior, then pay them on new business; if retention is the desired behavior, incentivize them to retain clients.
The remote vs. in-office dilemma
While there are pros and cons to both remote and in-office sales, a large majority of SaaS organizations hire and employ remote salespeople. When deciding how to operate, consider all the variables: Where is your organization headquartered? Does the city or area where you are located allow for efficient, affordable hires? Also, consider overhead: Do you currently have a brick-and-mortar office space with sufficient space for more employees?
Another thing to think about is time zone. If you are on the west coast, your salespeople might start their day as early as 4 a.m. to coordinate with the east coast clients, or the opposite – east coast agents must work late into the evening with west coast clients. Being able to distribute salespeople throughout different time zones can allow for more efficient work hours, and perhaps better coverage for client needs.
If leaning toward remote workers, be very specific about expectations during the search process. Time management and accountability are vital when it comes to remote positions, especially revenue-producing roles.
Thinking through a comp plan
The easiest way to create a sales compensation plan is to base it on the budgeted personal production that a sales agent is set to produce. A good rule of thumb is the 3x multiplier. If an agent is set to produce $300,000 ARR in new business annually, set their OTE (on-target earnings) at $100,000. Across the SaaS industry, the most common split on salary and bonus is 50% bonus and 50% commission.
There are many ways to structure the commission piece. One consideration is the length of sales cycle for the service or product. If it’s within 30 days, monthly pay would most likely suffice; if it’s a 6-month sales cycle, then looking at a quarterly bonus pay may be better suited.
Another consideration is onboarding a new client. If onboarding takes longer than 30 days and the first payment isn’t made until after this is complete, then quarterly bonuses might be a good option. This would prevent the organization paying on potential bad business should the client turn out to be a nonstarter. Again, the most important aspect of a pay plan is to drive the team’s desired behavior and results.
With more than a decade of experience building and training sales teams, Snapper Ussery is VP of Sales at Greater Sum Ventures. As an operating partner to a dozen portfolio companies, he consults with a myriad of brands to optimize their sales teams and tactics, encourage cross-selling of multiple software products, and drive aggressive growth across the enterprise.