teej

Account Exec

Churning customers = clawback on AE commission?

Hey guys,

Curious to get some feedback here from other sellers.

I sell a SaaS product which has an annual agreement but the customers can pay it monthly (via a credit card recurring bill). We don't have crazy churn, but we do have customers who churn out in the middle of their terms typically between 6-8 months, often due to poor program performance / lack of ROI. We have a customer success team who manages these customers, and they attempt to turn around performance but this team is also often willing to let customers out of their agreements if they face pushback or asks to cancel.

Here's the kicker - if a customer churns before the end of the 12 month term, I get clawbacks on my commission based on how many months they actually used our product out of the annual term. It's worth noting that sales is the only department who's pockets take a hit from this which is what really strikes me as wrong - customer success doesn't get penalized for churn in the first 12 months - sales does.

In my mind, this is a cluster. It pulls sales away from new business focus and brings us back into customer preservation. I am happy to help try and preserve customers, but am looking for feedback on how best to push back against this policy internally. As it stands, the sales team is the only team who fights to preserve these poorly performing customers because we don't want a clawback. This is selfishly motivated in some cases, and at odds with the business who seems scared that we may get poor reviews from keeping unhappy customers locked into signed agreements.

I have repeatedly suggested that sales shouldn't face a clawback here, this is the CS team's job and if the business wants to let people out due to performance that shouldn't impact my compensation.

I'm open to feedback - is this a common practice in other orgs and am I offbase for feeling this is a terrible structure?

☁️ Software Tech

8

11 comments

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poweredbycaffeine

WR Lieutenant

3

☕️

I have always designed comp plans around clawbacks if the client cancels within the first year, regardless of their payment terms. CS does not get dinged until they fail to renew at the annual mark, but the deal cycle is often what causes the pre-annual churn so it makes sense to fall on sales.

Do you get paid up front on ACV, even if the client is paying monthly? Even more reason for me to get money back for the company. I’m not paying you for 12 months of use if they only pay for 4 before they cancel. Makes no sense business economics wise.

teej

0

Account Exec

We get paid on the ACV upfront, correct, and your comment makes sense and I get the business focus. That said, we use annual agreements that the customer signs and our CS team just lets them go if it's a poorly perfoming program for the customer. There's no out-clauses or options for the customers to cancel - if CS has an unhappy and/or poorly performing customer who asks to be let out, they typically just say ok and let them go.

I'm thinking of proposing a plan like: churn in the first 6months is on sales, but in the back 6 months it's about CS and whether the product is actually working for the customer.

poweredbycaffeine

WR Lieutenant

1

☕️

I’d avoid that proposal and instead approach the team with a request for a better contract.

Diablo

Politicker

1

Sr. AE

We have a simple formula, if company hasn’t earned anything, they don’t share anything with you.

Sunbunny31

Politicker

2

Sr Sales Executive 🐰

Yeah, I don't get paid until the full annual invoice is in. That can suck at the beginning, but it eliminates virtually all clawbacks.

You just have to learn how to plan for the PO/Invoice process and the net-payment terms.

Jewcan_Sam81

Politicker

1

Account Executive

We get clawbacks, but it only hits our quota coverage not our wallets. So that’s cool I guess

Pachacuti

Politicker

1

They call me Daddy, Sales Daddy

Does CS get paid on the front end like you do? If not, there is nothing to hit.
Also, it may make more sense for you to get paid a commission monthly rather than it all upfront. That way there is nothing to clawback.

payton_pritchard

Executive

0

RSM

Sounds frustrating since there's a separate CS team. I've heard of systems where CS has to give new customers a thumbs up and accept them as a good fit before taking the handoff but I'd imagine there's a lot of challenges that come with that as well.

Having your commission paid out per month might be good so that instead of payments being clawed back they simply stop.

CaneWolf

Politicker

0

Call me what you want, just sign the damn contract

Kind of not answering your question but it might be a remedy to the ultimate $ issue - would the company let you discount an additional 10% for up-front payment? Probably worth it for you.

ColdCall

Valued Contributor

0

Account Executive

Start selling 12 month contracts? If they can't commit to a year, are they going to be a good customer?

How are you selling to them when they start? Is it buying a thing or are you tied into their biz objectives/problems?

Do you work with CS teams to have Service Kick Off's, Mid Term Reviews and renewal calls?

Ive worked in places with pretty awful churn and where I'm at now has 99% retention- which is crazy!

Hard to manage this once sale is done, better to do what you can before they sign to ensure longevity.

tfsco

0

IBO

Is clawback incentivized

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