TheViking

Director of Enterprise Sales

Personal Narrative

Consumption based SaaS comp plans

Apparently my organization is pivoting towards a much larger part of our OTE being consumption based, vs new ACV bookings next year. I am curious from others that have either been trough such a change or is on a consumption based plan - how do you make money past OTE?

It just seems to me that unless you are able to grow consumption starting at the begging of the Fiscal year, you are behind the eight ball, and can't make it up with a big deal in Q3 / Q4 , and then that deal will drive your consumption target for the following year. I am sure I am missing something - but my initial gut reaction is around 'how will I get to 150-200% of my OTE on just growing consumption'

This year we have a small part of the comp being consumption, but the target was based on run-rate of Q4 last year + some growth, which means by the end of this year, I'll most likely end somewhere around 90-100% at best. I am just trying to understand how peoples experiences are with plans in the field. (I have no details on what ours will be yet)

💰 Compensation

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GDO

Politicker

3

BDM

They scared of their own churn rate?

CuriousFox

WR Officer

1

🦊

👀🍿

jefe

Arsonist

0

🍁

Bingo

braintank

Politicker

1

Enterprise Account Executive

Why the change?
Customers churning?

TheViking

Personal Narrative

2

Director of Enterprise Sales

I think they are changing because we want to be a consumption based company (that is how we report revenue now) - and so this is an alignment of compensation to our revenue reporting model from what I can tell. As a fairly high growth company, our net revenue retention is really high - so I doubt churn is a driver.

Space_Ghost20

Valued Contributor

1

Account Executive

I had a role once where one of the solutions we sold was consumption based. It was pay as you go for the customers, billed at month's end. Even though the solution was theoretically a "must have" a lot of the businesses we worked with were less than dedicated to proper compliance and CYA policies, and viewed the solution as a "nice to have." There were no minimum commitments so once the economy went sideways, a lot of the companies used the solution less frequently, which cut revenue substantially. A deal that was forecasted to be $45k when it was sold in January, ended up being just shy of $12k.

We had another solution we could sell that was sold on the traditional annual contract basis, but it was debuted halfway through the year. Took longer to sell customers on it, harder to implement, so it wasn't a real answer to the problem. Not only was this impacting our compensation, but because the company was running out of capital and had just burned through a stack of cash building that second solution, it was impacting cash flow. Delayed commission payouts, and then ultimately multiple round of layoffs. If the company was on more solid financial footing they probably could have figured something out, but that's not what happened. They're still around, but I don't know how solid they are.

DataCorrupter

Politicker

0

Account Executive

I had an experience going through the same thing. It took a year or more to really get comp plans balanced, and during that time, it was skewed to benefit the company more than the reps. It only started to get good for reps when we got paid on projected yearly consumption (based on Q1's spend, we project they'll spend X for the year). You could get some good valuations going for the year and beat your number, but before that happened it was as you said, a mystery how you'd go over quota. The downside was clawbacks on those yearly projections, in Q2 the customer didn't spend as much as Q1.

Hope it bodes well for you, but hold on for a rollercoaster year where the company tries to figure it out.

HVACexpert

Politicker

0

sales engineer

I’m not familiar with consumption based pay what is that?

bendandsnack

Politicker

0

Account Exec

At my company our attainment for a client is what we estimate the year will look like in consumption, which is usually last month x 12. Yes, it does mean we can make up our own attainmnet % and no one fact checks it.
However, we only get paid a % each month on what the client actually consumes for 2 years after the client signs with us.

Pros - ongoing commission check

Cons - keeps you on a leash

Does your company offer consumption commitments? We get an upfront spiff equalling the estimated payout for Y1 if we can sign a client on a committed consumption contract.

TheViking

Personal Narrative

0

Director of Enterprise Sales

Right now our core payout is based on consumption commitments. We have an annual quote for the commitments - and its the primary component of our comp plan.
This year, consumption was a small part of my comp plan, and was based on monthly consumption by all my customers.

Next year the only part I know is that the consumption piece will grow to be the primary component of our comp plan - which if they keep it like it was this year would suck - while it had accelerators on it, they were pretty limited compared to how solid they are on the consumption commitments this year.

I do like the idea of monthly checks, that is a perk for consumption based - but if there is no realistic path to 200+% of my OTE, its not all that attractive in the end.

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