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An Intro to SaaS Sales: Sales Cycles, Commission Rates, Models, and Metrics

SaaS sales

The most important thing you can do for your SaaS company when you’re starting out is to lay down solid foundations for success. This means not only having a thorough understanding of SaaS sales cycles, models, and metrics, but also knowing how to apply that knowledge in a manner that fosters a state of growth for your startup. It can be time-consuming and confusing – but having a detailed roadmap to follow can save a ton of headaches further down the track.

You’ll never have as much time as you do right now to learn, strategize, and plan ahead for the future of your business.

Apart from working on developing your product and finding the market fit, there are several other key factors you need to think about before you start hiring your sales team.

The SaaS sales cycle

SaaS sales cycle

SaaS sales cycles vary and are affected by a number of factors, such as product price, target customers, and even product complexity. Based on your product – is your sales process likely to be self-service, low touch, or high touch? How long will it take you to acquire a customer? What will your average deal size be?

These are only a handful of the questions you need to ask yourself when you’re figuring out what your SaaS sales cycle will look like.

Will you have a free trial?

If so, this will be likely to extend your sales cycle by anything from 7 to 30 days, and possibly beyond that. It’s important to keep this in mind, as free trials are often overlooked when the SaaS sales cycle is being calculated.

Is your SaaS product complex or expensive?

If your product requires in-person demos and a lot of back-and-forth communication to demonstrate the value and benefits to your customers, such as an enterprise software, your sales cycle is naturally going to be longer. Likewise, if your product seems expensive compared to the competition, a lot more work will be needed on the sales and marketing side to get buy-in from your prospects.

Are you looking at securing enterprise customers?

Closing big-ticket enterprise SaaS sales can be extremely lengthy and complicated. These deals tend to involve numerous people at different levels and can take months to complete. There’s always a risk that the deals will fall through, even at the final stages, which you need to take into account. On the upside – getting enterprise customers on board can give your startup a huge advantage!

Make sure your sales cycle is realistic and that the goals and commissions you set for your B2B SaaS sales reps based on your calculations are achievable.

SaaS sales compensation models and commission rates

SaaS sales compensation models

Commission rates for SaaS sales are paid to your sales reps with compensation models structured just as they would be in any other industry – when a rep closes a deal with a new customer, renews an account, or upgrades a user to a higher tier plan.

Payments for SaaS sales are made based on metrics such as your monthly recurring revenue and deal sizes, so it’s important to think carefully about structuring compensation plans that will work for your particular business.

With SaaS sales models, there are a few different ways you can structure payment of your commission to keep your cash flow steady and cover the base salaries of your sales reps.

Whichever SaaS sales compensation model you decide is right for you, it should be simple for your B2B SaaS sales reps to understand, and motivating enough to drive them toward getting the best results for themselves – and ultimately for your business.

Delaying commission payments

As you’re reliant on the subscription model to grow your business, you might want to delay commission payouts in the event of customers cancelling their subscriptions early or failing to make payments.

You might even consider a longer term delay until your reps have sold enough to cover their arranged base salary. This protects you from customers that churn out and ensures you’re not paying out more than you can afford at an early stage.

A recent survey showed that only