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Is there any such term 'Revenue Realization' folks?

I work in a startup selling technical product. I've been told that I'll get paid upon revenue realization means if I close a deal worth $50K in ARR, the commission is 5%. I'll get paid every quarter for how much revenue has been realized meaning 25% of the 5% commission. This way the overall 5% commission payout is spread over 4 quarters. Is this reasonable?


Let me know - thanks!

โ˜๏ธ Software Tech
๐Ÿ’ฐ Compensation
๐Ÿ“ณ SaaS
14
TennisandSales
Politicker
3
Enterprise Account Executive
so i HATE this type of comp model.

Ive only seen it at early stage startups that are short on cash or have no confidence in their ability to collect from customers.
I lived this comp model in my first saas AE role. i had to keep my own spreadsheet to make sure i was getting all my commission. things got missed ALL the time.

this makes small deals feel tiny and big deals feel small.

there probably isnt anything you can do, but i would make a point to tell leadership this is not the best and ask if they are looking to change it in the future.
revenuegenerator
Good Citizen
1
Sales Management
^^ what tennisandsales said x2. Are you signing customers to annual agreements? If so, this is not an ideal situation to be in. The customers ability to pay and the companies ability to deliver the product should not affect your comp for bringing new customers in the door.

The fact they do this and your product is only 50k acv, makes me think cash is super tight there.
TennisandSales
Politicker
0
Enterprise Account Executive
its always because cash is super tight. I think start ups can get away with this for a hot minute. maybe up until their series A. After that, you need solid talent and it could be MUCH harder to get those ppl if the comp plan blows.
jefe
Arsonist
3
Head of Sales
Makes sense if that's how the clients pay, but if they pay up front and you're paid on usage it's some BS.
CuriousFox
WR Officer
2
Senior Account Executive
How often does the client pay?
Kyzer
Fire Starter
1
AE
Annual, and some quarterly. BTW, all deals are tied to annual contracts
nomdeguerre
Valued Contributor
1
VP of Channel Partner Sales
How does the customer pay? Monthly, quarterly, annually?
Kyzer
Fire Starter
1
AE
It varies. Some Enterprises tend to go the annual route, well most of them do. And a few clients are tied to annual contracts but are paying on a quarterly basis. I'd say 60:40 to be fair annual vs quarterly
nomdeguerre
Valued Contributor
0
VP of Channel Partner Sales
If the customer is paying annually in advance then I see no reason why you would only get paid monthly. Unless they are a termination for convenience clause.
antiASKHOLE
Politicker
1
Account Executive
I'm following and I'm not a fan
Kosta_Konfucius
Politicker
0
Sales Rep
Itโ€™s not typical but the benefit is you will be getting a Paycheck more consistent but also if you ever leave you will leave money on the table
Kyzer
Fire Starter
1
AE
That's what am concerned about!
adrienmc
Good Citizen
0
Founder @LaGrowthMachine
If your customer pay on a monthly basis, this is 100% normal and a great way to align interests by making sure youโ€™ll aim for client that will last over time. Though your commission pay out should be every month too

If they pay upfront (annually or any other periodicity) then you should be getting the full commission when that upfront payment is confirmed
Kyzer
Fire Starter
0
AE
I think it makes sense. In my case, the commission should reflect the payment term at least - if it's quarterly, annual and vice versa.
Notmyrealname
Politicker
0
SDR
I guess it sounds reasonable unless the client pays up front for the year? If they pay quarterly what's to stop them dropping out after 1 or 2 quarters? And this sounds like a much better system than clawbacks.
Kyzer
Fire Starter
0
AE
I know but it applies to all deals regardless if the whole annual payment is made upfront etc
FinanceEngineer
Politicker
0
Channel Sales Director
So that means when the product is used. So when someone spends $50k annually, they realize 1/12 per month, so 4.17k a month is realized. Now the question is how long do you get paid? If itโ€™s forever, then you get that 5% of $4.17k every month until they stop being a customer.
butwhy
Opinionated
0
Solutions Engineer
Ugh, this is how Google used to comp its SEs and I think it is bullshit. You sold the deal - CS should be comped on usage.
DungeonsNDemos
Big Shot
0
Dialing for Initiative
My first question is: is anyone already on this type of comp plan at your company now? And if so are they happy?
tightlines
Opinionated
0
Account Executive
The worst, my last company paid on the revenue recognition, which could be up to 2 EFFING YEARS after signature. Absolute garbage
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