Hannibal

Senior Account Executive

Consulting Services - How much commission?

A friend a mine is looking at an opportunity to join a company that has historically been a Consulting Services shop but has developed some applications and pivoting into SaaS and hence why they are going after him. The comp plan suggested looks scary low to me but since I don't have much experience selling services I wanted to check with the expert savages what would be a reasonable ask. The average deal size is probably $150-250k+ range in services... some more and some less. I am used to commission for ARR on SaaS in the range of 12-18% and adding accelerators... I usually only get paid like 1.5-3% on services.

Any suggestions?

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Justatitle

Big Shot

Account Executive

The deal size likely factors into the commission being what it is. 12-18% on a 25k contract is like 3-5% on the 150k contract. Also professional services get expensive quickly as you are paying for physical man hours not necessarily software which has already been built and is turnkey so that all factors in to it

Hannibal

Opinionated

Senior Account Executive

Thanks - my point being is what is an acceptable range for someone who is supposed to bring $5-10M in revenue. 3-5%, less or more?

Justatitle

Big Shot

Account Executive

Not trying to be difficult but you have to consider the margins on that 5-10 million. It isn’t so cut and dry. Unfortunately

swizard

Celebrated Contributor

Sales Evangelist

Valid points here! Its very hard to crunch numbers without knowing the cost breakdown and profit margins

Hannibal

Opinionated

Senior Account Executive

Correct - but I am just looking for a a range, I understand that it is not software and not going to be double digits but 1% vs 3% is a huge difference on a $1M quota.

Telehealth_2the_Moon

Notable Contributor

Director of Business Development

This is spot on. Comparing commission structures should really only happen when it's a similar product you're selling. Here is a very simplified way to think of it. Take two $100k sales, one is a software product and the other is consulting, and compare them.

$100k Software Sale: The cost to your company is mostly in the past (development of the software among other things) and the cost for your company to fulfil this contract is minimal in comparison to the contract. Outside of implementation and account management, there aren't much more costs they might have to pay towards this specific deal. This means this $100k deal will bring in a good amount of margin for the company and therefore you get a bigger commission check.

$100K consulting services sale is different, they are paying for you to provide a consulting service. Now, a lot of this revenue is going towards the people who are actually providing the consulting and the margin is coming off of what's left so there is a smaller commission check.

This being said, usually sales for something like a consulting service are going to have a much bigger ticket price on them which is where Justatitle's point about the commission check being the same size despite it being a different percentage.

In your friends case, if this company is pivoting towards SaaS and is bringing him/her in for this specifically, they might be using their standard commission plan without consideration of how SaaS is traditionally structured. They might earn themselves a nice bump if they point that out.

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Hannibal

Consulting Services - How much commission?

6 comments

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