Michael – great post. I have a question… how long do sales people typical receive a commission on a license deal? Does it expire after a certain amount of time, or do you typically recommend that the sales person makes money on the accounts they open for an extended period of time?

Dan –
Thanks for your question. This comes back to the “hunters” versus “farmers” concept mentioned briefly at the end of the article. Front end sales (hunters) typically get commissions based on a either a fraction of the CMRR or CMRR plus some factor based on average transaction or usage fees for the client size. That is a one time fee so they need to get out and “hunt down” more customers.

Account Executives (farmers) are generally a separate group in the sales team and exist only after the customer base has grown significantly in enterprise or Line of Business applications. They are assigned existing company accounts above a certain value and are usually compensated on retention or churn. In the best case, they will have opportunities to either sell premium services or more seats as the application adds features that reach more users. Most are compensated on some fraction of the CMRR with bonuses for reaching negative churn particularly in target accounts. Their job is to maintain the customer relationship, forward to product management any issues the client may have and evangelize new extensions of the product within their client accounts.

In new SaaS businesses there may be no need to have separate Account Executives – the front end sales can probably do both for a time. But the skills of maintaining relationships are different than making new sales so in time most companies split the two. I have seen businesses that push this responsibility to customer support in some way especially in applications with an SMB focus or a lot of single user accounts – a lot depends on how “interactive” the relationship is expected to be. In these “social media times” – more interaction seems to be more effective and honestly – SaaS means service so why not?