tuesdaysgirl

Senior Consultant, Business Development

Commission Plan for Multi-Year Contracts

I sell a highly specialized service. Our standard contract term is 3 years with a 7% escalator, but I've also negotiated longer and evergreen contracts. What can I say, I'm a company gal? Entry Annual Contract Value is around $150k. i am currently paid on the first year value. I'd like to negotiate payment for Lifetime Contract Value. I've done over $5M in LCV on 4 years, so I think this is more than reasonable. Tips and thoughts appreciated.

🧠 Advice

🍾 Commission

💰 Compensation

20 comments

Sort by:

Justatitle

Big Shot

Account Executive

Posting as devils advocate to try to help you prep for what you will get pushback on.
1.) Are you managing the relationship over the lifetime of the customer or does that go to CS to manage?2.) Did you do any development of the product in order to attract the client?3.) Are you sourcing these leads that close or are they inbound?4.) If they won't pay out for LCV you may have a path to more on the 1st year to increase your rate

tuesdaysgirl

Contributor

Senior Consultant, Business Development

1. Yes, I stay involved to land and expand. 2. Yes, it’s a highly consultative sale that involves quite a bit of development. 3. Some sourced, some inbound. 4. Good point. Thank you for helping me hash this out.

Sunbunny31

Politicker

Sr Sales Executive 🐰

Where I work, also 3 year terms preferred. We are comped out on ARR + additional for the 3 year term if the 5% y/o/y increase is also present. So we get both the % for ARR and additional for every 3 year deal that’s structured the way our company prefers. So ARR + TCV up to 3 years.

BmajoR

Arsonist

Account Executive

That sounds great! We used to get paid out for up to 3 years then they changed it to a larger sum on year 1 value. It is a little bit nicer this way though so we're not tied down if we ever want to leave, plus not having to wait longer to get fully paid out.

Sunbunny31

Politicker

Sr Sales Executive 🐰

We do get paid out up front - but after the invoice is paid. So I do not have to wait on the total payout. However, because there's no termination for convenience AND we have to wait until that invoice is paid, clawbacks are exceedingly rare.

tuesdaysgirl

Contributor

Senior Consultant, Business Development

Thank you. This is very helpful.

Sunbunny31

Politicker

Sr Sales Executive 🐰

Sure! Always good to ask about how other companies are doing it.

CuriousFox

WR Officer

🦊

🐇 spittin straight fax

CRAG112

Valued Contributor

Account Executive

The only thing I can do is recommend reaching out to Dan Goodman, Employee Advocate, on Linkedin.

He does a lot of this stuff and I have talked to him about situations and it was like he lived it himself. He might have some killer ways to go about that process. He is also very accessible to DM's and phone calls.

pirate

Big Shot

🦜☠️ Account Executive

It's interesting. I've never heard of LCV. I think if you're already doing numbers for it, definitely negotiate it. What are you selling?
I'd try and find a way to derisk it though. As in can you instead negotiate a promotion or higher base or more benefits? More commission?
My thinking is that if you're getting LCV figures down. Nothing stops them from changing the comp plan or moving from LCV to TCV or something. Whereas with higher base... It's still higher base no matter what. Or benefits stay.
Just my two cents. Interested about what others say.

Diablo

Politicker

Sr. AE

Is the 3 yr paid upfront or just a signed commitment?

tuesdaysgirl

Contributor

Senior Consultant, Business Development

Paid quarterly in advance. I’d be fine with getting paid as the client pays. Most contracts have a 6 month opt out. Since I stay involved I have some influence on the success of the deliverable.

Sunbunny31

Politicker

Sr Sales Executive 🐰

Understood that services are different than platform in this regard.

Sunbunny31

Politicker

Sr Sales Executive 🐰

Oh, this is a good point. Our long term contracts are non cancellable - there's no termination for convenience. Only for breach.

AnchorPoint

Politicker

Business Coach

Appears it would be in the company's interest to pay you... othewise, why sell long term?

CPTAmerica

Opinionated

President/CRO

Not sure how mature your company is but that's a pretty big ask IMO. Maybe if they are very early with a lot of flexibility.

SoccerandSales

Big Shot

Account Executive

Seems like it would be difficult, because as an org, it is cheaper for me to pay solely based on ACV

saasesforthemaases

Tycoon

Account Manager, West

I would negotiate for something like:
- Base Commission Rate on Year 1
- 1/2 Base Commission Rate on Year 2 and beyond TCV
- Get accelerators to map to BCR for ACV
Get all payments for all years upfront in year 1.

That's a fairly standard SaaS model for Series C and beyond.

Maximas

Tycoon

Senior Sales Executive

Just absolutely fair enough endorse you to go 4 it as long as the contract is still alive and you were the one that signed em up,then Why Not!!

HVACexpert

Politicker

sales engineer

This is so interesting to me, I have zero experience with contract sales.

So you negotiate a base basically and a % per sale? Then just write off other expenses?
Do you “report” to someone? I have so many questions …

Bravado is a community of trusted sales professionals endorsed by their customers.

Products

The War Room Jobs Salary Guide Tech Sales U

Company

About Us How It Works Blog Bug Bounty

Contact

Press Careers

If you are hired as a contract sales rep by a Bravado customer, we may ask you to prove access to the employee email account provided to you by that customer. This data will be shared with customers to track your sales productivity; customers can use this data to confirm you meet the minimum activity requirements to pay out your ramp stipend and commission.

tuesdaysgirl

Commission Plan for Multi-Year Contracts

20 comments

Related posts

Currently have a contract out for signing on the last day of the FY

600K deal with a 2 year contract

Deceived on end of year bonus