Dear SaaStr: Should We Pay Our Sales Reps on Renewals? - The Entrepreneurial Way with A.I.


Thursday, February 10, 2022

Dear SaaStr: Should We Pay Our Sales Reps on Renewals?


Q: Dear SaaStr: Should We Pay Our Sales Reps on Renewals?

Simple answer: you can, especially in the early days.  But very few SaaS companies pay sales reps on renewals.

Longer reason: they don’t — because you want to specialize. We’ve all learned this over the past years in SaaS:

  • You want qualifiers qualifying — BDRs.
  • You want openers opening — SDRs.
  • You want closers closing — AEs.
  • You want retainers retaining — CS.
  • You want renewers renewing — CS or even Accounting, sometimes.
  • You want upsellers upselling — AM or sometimes AEs.
  • You want each rep only selling into the segments they are best at — so you segment your team into Small, Medium and Field/Large prospects. And later maybe even into industries and verticals. And direct and indirect. Etc. etc.

Specialize, specialize, specialize. It’s much, much efficient for skilled professionals to only be doing what they are best at. More leads close, faster. More renewals renew, faster. High NPS. Everything goes up and faster when folks are in their optimal role.

Of course, though in the early days this is impossible 🙂 You don’t have the scale or the capital or the customer base.

But start as early as you can. And part of this is closers should be closer. Not renewing.

Having said that, in the early days:

  • If you and the team feel paying sales reps something on renewals will help — just do it, at least try it.  Many reps won’t even be there in 2 years, some won’t even be there in 1 year.  And it’s an experiment you can run, to see if it impacts behavior.
  • And it makes a ton of sense to let AEs own upsells in many cases, especially past a certain amount.  A great line many SaaS companies use is if an upsell is < 20%, let customer success just handle it via a standard form.  But if the deal size is growing > 20%, they have to bring sales in.  And sales gets a full commission.

But most reps won’t do much to earn that renewal on its own, and you’ll probably abandon that experiment within a year.  It’s better to focus that bonus money upfront, on higher commissions.  And let renewal folks and CS folks on the renewal at Year 2.

pay again image from here

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Jason Lemkin, Khareem Sudlow