Kyzer

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!

☁️ Software Tech

💰 Compensation

📳 SaaS

23 comments

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TennisandSales

Politicker

Head Of Sales

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.

nomdeguerre

Executive

Account executive

“missed”

TennisandSales

Politicker

Head Of Sales

hahah! yeah it was always a "mistake"

nomdeguerre

Executive

Account executive

Yeah right. Oh whoops we toooootally missed that 😂

revenuegenerator

Praised Answer

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

Head Of Sales

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

🍁

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

🦊

How often does the client pay?

Kyzer

Fire Starter

Annual, and some quarterly. BTW, all deals are tied to annual contracts

nomdeguerre

Executive

Account executive

How does the customer pay? Monthly, quarterly, annually?

Kyzer

Fire Starter

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

Executive

Account executive

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

Tycoon

Bravado's Resident Asshole

I'm following and I'm not a fan

Kosta_Konfucius

Politicker

Sales Rep

It’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

That's what am concerned about!

adrienmc

Good Citizen

Founder @LaGrowthMachine

If your customer pay on a monthly basis, this is 100% normal and a great way to align interests by making sure you’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

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

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

I know but it applies to all deals regardless if the whole annual payment is made upfront etc

FinanceEngineer

Politicker

Sr Director, sales and partnerships

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 it’s forever, then you get that 5% of $4.17k every month until they stop being a customer.

butwhy

Politicker

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

Rolling 20's all day

My first question is: is anyone already on this type of comp plan at your company now? And if so are they happy?

tightlines

Politicker

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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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.

Kyzer

Is there any such term 'Revenue Realization' folks?

23 comments

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