The software industry, along with many others, decades ago adopted a sales model we informally call “50/5/1/100,” shorthand for “a base salary of $50K, 5% commission, $1M in sales for a yearly salary of $100K.” These are highly idealized figures, but when you examine a number of different sales plans across different industries, including high tech and software, the outlines of this model usually appears.
We were discussing the numbers and analysis in our new Softletter SaaS Direct Sales Compensation and Efficiency Report with Mitch Russo, former CEO of TimeSlips and COO of Sage, PLC, when he told us he’d been able to create high quality sales forces studded with sales “Superstars” who were paid far less than the standard bases associated with most SaaS companies. Mitch is currently working on a new SaaS startup (sorry, he doesn’t want to talk about it at this time, but we will be following up) and we thought this was a very interesting point, particularly in the case of companies ramping up operations who may be short on cash but long on sales prospects. And what software company doesn’t need some sales superstars?
The upshot was we asked him to share his secrets and techniques. We warn you in advance, his ideas and concepts are very different from the normal hiring practices used in the software industry. But Mitch has a proven track record and worked closely with the late Chet Holmes, author of The Ultimate Sales Machine in developing his ideas and practices. We suggest you read the following closely.
How to Hire Software Sales Superstars
By Mitch Russo, CEO, PowerTribes
Beginning in 2008, over the course of five years, I built a completely virtual sales team that increased sales volume a conservative 45% each year on behalf of Business Breakthroughs International, an online business services and development company founded by the late Chet Holmes and Tony Robbins. The size of the sales team fluctuated between 80 and 100 people, with monthly turnover that was the result of promoting and advancing the best closers.
Our sales system did not follow the Softletter model discussed in the introduction. Instead, we hired people based strictly on performance, with no base salary but sales commissions in the 40% to 45% range. There were no limits on their potential earnings.
We hired our personnel via a PEO (Professional Employer Organization), which meant we were co-employing our staff. This arrangement meant that the PEO met local and federal labor laws, while Business Breakthroughs was responsible for the day to day management and training of our personnel. We also provided a 401K program, but it was fairly bare bones.
While Business Breakthroughs was an online service business, I’ve learned from working with other companies that the model we built, with some modifications, is also an excellent fit to SaaS firms, particularly new businesses ramping up sales. Protecting cash flow in SaaS is always a concern. The best way to handle this problem is via high sales coupled to high commission rates. And the best way to accomplish that is by hiring the best salespeople, what I call “Sales Superstars.”
Are Sales Superstars Myths?
Some people think Sales Superstars are mythical beings, but after looking through Softletter’s recent release of its SaaS Direct Sales Compensation report, I find this particular question and its response very interesting.
What percentage of your total direct sales is achieved by the top performing 20% of your representatives?
|20% or less||13%|
|21 to 35%||20%|
|36 to 50%||23%|
|51 to 65%||7%|
|66 to 80%||17%|
|81% or more:||20%|
Aggregated, 44% of the respondents reported that 20% of their sales force accounted for 51%+ of their sales. The Sales Superstar is not a myth. But you have to know how to find them.