Key Highlights from Softletter Sales Compensation and Efficiency Survey, Part II of II

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The Softletter 2016 Direct Sales Compensation and Efficiency Survey was launched in October of 2015 and closed in January of 2016. The MatrixCX (Allegiance) online system (www.allegiance.com) was used to generate and manage the survey. The purpose of this survey was to develop a comprehensive analysis of current practices in software industry direct sales compensation and success measurements or efficiency of a direct sales force. This survey had respondents answer 47 detailed questions to give us an accurate snapshot of their sales compensation practices, results and measurements.

The survey recorded  258 valid responses. The single largest group, 46% of respondents, reported their title as Owner, Founder, or President and CEO of their companies. This was followed by 20% identifying themselves as Vice President or Executive Vice-President of Sales or Sales and Marketing. The balance of respondents were senior sales managers, Directors, CFO’s, COO’s or other mid-level management positions responsible for sales and/or sales compensation within their respective companies. 20% of those taking the survey were international, with representation primarily from Canada and EU countries. These numbers are very much in line with our previous sales compensation research.

Of the companies responding, 63%, were from the Software as a Service (SaaS) Sector. This was followed by 11% from On-Premise firms (including desktop and server firms, and 13% OEM. This extract from the survey only includes summaries from the participating SaaS companies.  Results from on-premise and OEM firms will be broken out independently in the upcoming 2016  The Softletter Sales Compensation and Efficiency Report (the new report will be released in April).

An important point we wish to make is that after years of analysis and research, we have discovered sales compensation numbers do not shift significantly over time. We are aware that new sales methodologies, books, and “breakthroughs” are being introduced on a constant basis to replace the previous new sales methodologies, books, and “breakthroughs.” And yes, SaaS does eliminate the time a direct sales representative may spend on the road. Yes, customers are taking advantage of online resources, sales cycles, depending on the market, can shrink, and providing good quality content for prospective customers is important. But nothing in our numbers indicates that direct sales is going away, particularly in larger and “enterprise” sales. Before contracts are signed and checks written, the need for personal sales management and contact remains vital.

Please note: Percentages have rounded up or down and may not total 100%. Numbers of particular significance have been bolded.

Please indicate by what percentage you exceeded your direct sales plan

Less than 10% 12%
11 to 25% 74%
26 to 40% 2%
41 to 55% 11%
56% to 70% 11%

 How often does your company change its direct sales compensation plan?

Have never changed 13%
Quarterly (three months) 2%
Bi-annually (six months) 6%
Yearly 47%
Necessity only – no scheduled reviews 29%

It’s no surprise that Yearly remains the most popular choice for sales plan adjustment and reevaluation. A company which is constantly revamping its sales plans has either not thought worked through its numbers and strategy carefully, or is often involved in an attempt to move the goalposts on a salesforce. Such game playing is always counterproductive.

Are direct sales managers measured and rewarded based on meeting and exceeding direct sales targets?

Yes 87%
No 13%

An unremarkable result.

What percentage of a direct sales manager’s overall compensation is tied directly to their sales team’s performance?

1 to 5% 8%
6 to 10% 12%
11 to 15% 12%
16 to 25% 19%
25 to 40% 23%
41 to 50% 15%
51% + 8%

A drill down into this metric reveals that higher % rates correlate with larger companies and firms aimed at more enterprise class sales.

How frequently are direct sales targets set and measured?

Weekly 7%
Monthly 16%
Quarterly 3%
Bi-Annually (six months) 40%
Yearly 10%

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%

We’ll let these numbers speak for themselves.

What is the average yearly sales quota assigned to your direct sales representatives?

Less than $250,000 20%
$251,000 to $500,000 33%
$501,000 to $1,000,000 20%
$1,001,000 to $2,000,000 7%
$2,001,000 to $3,000,000 13%
$3,001,000 + 7%

What is the primary compensation method for your direct sales representatives?

Base Salary plus commissions 80%
Base Salary plus Incentives bonus(es) 13%
Salary only 3%
Commission only 3%

Base plus commissions is the dominant compensation model for software and has been for over 70 years. Nothing is changing.

What is the average yearly base salary of your direct sales representatives who are compensated via a base salary and commission?

Under $30,000 2%
$30,001 to $50,000 27%
$50,001 to $75,000 25%
$75,001 to $100,000 42%
$100,001 to $125,000 4%
$126,000 + 12%

When you pay variable compensation(commissions) for new SaaS business, on what basis is your direct sale force paid?

Annual Contract Value (ACV) 21%
Annual Recurring Revenue (ARR) 16%
ACV or ARR with an uplift for multiple years 21%
Total Contract Value (TCV) 26%

If a direct sales representative being paid on a base plus commission basis exceeds quota, how are they typically compensated?

They do not receive any extra compensation 15%
A combination of an increase in commission and a fixed monetary bonus 28%
Fixed monetary bonus 13%
Increase in commission percentage 43%

No extra compensation correlates with smaller companies. We don’t recommend this compensation strategy.

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