thesalesman

Senior Director of Global Sales

New Business Sales vs Expansion Commission Management

Hi people,

We have scaled our company to a Series D level largely based on Inbound leads. Now, when starting the Outbound Sales motion, we have 30-40 named accounts assigned per rep that they need to prospect into and close.

Our Sales cycle in Outbound can be somewhere between 6-9 months. We are in a new category of products so the land $ is not very high (ranging around $50K) but blows up crazily in the next 6-12 months with expansion (upto $500K once they have seen value).

Structurally, we have created an expansion team which is separate from New business team who focuses on expanding the landed accounts.

Also, the accounts (opps) once closed get transferred immediately from new business to the AM team.

Challenges:

New business team feels the hard work is too much for such a small land
They do not get the revenue multiple nor kickers for expanded accounts and associated $ value

Solution: We plan on giving New business reps a % of $ value closed by expansion team in the first 12-18 months (TBD).

Question: What should that % be? Any other models that have worked better in such scenarios, thanks in advance.

👑 Sales Strategy

💰 Compensation

🧢 Sales Management

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12 comments

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TennisandSales

Politicker

3

Head Of Sales

hmmm i think another option would be to have the AE keep control of the account for a period of time after close. (like 9 - 12 months).

what thought has been put on that plan?

Giving credit to someone who didnt do anything is a hard thing to justify haha.

I have lived this exact thing. as an AE i fought AGAINST receiving commission for the upsells the AMs did.

That just creates a divided workforce in my mind.

thesalesman

1

Senior Director of Global Sales

Totally get it and makes sense. We have thought about it.

The challenge one can get into though is reduced focus on new business to get to $ numbers as expansion (AM) is comparatively easier and to structure quotas for that is not that straight forward unfortunately. The new logo acquisition ratio can come down. Thoughts on how the company managed there?

TennisandSales

Politicker

0

Head Of Sales

Yes structuring a quota for that will be hard, if you need to show net new logos as a different metric than total revenue.

In my situation, the leadership team did not care if the number of logos we closed went down, if the overall revenue was going up.

What is making setting an expansion quota difficult for you? (i can assume a number of factors but curious what it is for your team)

Sunbunny31

Politicker

2

Sr Sales Executive 🐰

6-9 months of effort to land a $50K deal and then watch it blow up by 10X for someone else after all the effort has been put in would be a huge challenge for a rep. Penetrating new accounts, building value, and landing that first deal is huge, and you need to keep that Outbound team eager and ready to go. If you don't, you will end up with a dissatisfied workforce, probably leading to attrition you don't want. I appreciate that you have recognized the problem and are looking for ways to resolve it.

I agree with TennisandSales, allowing the Outbound rep to keep the account for some time after close could be an option. We do that where I am - all expansion falls to the rep for a set time after close. Since we comp our CS team differently, this works for us. I'm not sure if you scale that way, however. We work together as a team on our mutually assigned accounts; CS is comped on renewals and gets their bonus tied to % growth on the accounts. So, when I close $100K on a growth account, my CS receives the bonus for growth above and beyond straight renewal, I receive my sales % on the order.

One caution I'd provide is to make sure whatever you decide to do compensates the behavior you want. For example, if you decide to provide a % to the Outbound team, but it's for any expansion 12 mos after the initial sale, would it be in the personal financial interest of the AM rep to slow down the next order so that it will close in the 13th month post-sale? If that's not a desired behavior, then don't set the system up to reward it. I've seen this happen over and over at companies you think would know better. Trust reps to find every single loophole that will enable them to better their comp payout, even if it's not beneficial to the company, so make sure that plans incentivize the desired behavior.

A few questions:

What is the % the Outbound teams land for the initial sale? What's the % the AM team gets on expansion?
Does your company have the revenue and stomach to pay additional % on those expansion deals?

CuriousFox

WR Officer

1

🦊

I worked at a place like that. Sometimes it would take 18 months to get someone signed up, trained, and they would start ramping after 9 months. We only got paid on it for 12. THE. WORST.

thesalesman

0

Senior Director of Global Sales

It's a similar ratio in both cases, about 10-15%. The second one is a good question that needs more thought.

poweredbycaffeine

WR Lieutenant

2

☕️

What is the total commission % paid for expansion deals to your AMs?

Gizmo

Politicker

2

AE

I worked at a startup that would always take away the account right after the AE closed. It NEVER went well. Two big reasons why:

1) The AE would spend months learning about the customer's business, challenges, and objectives in adopting the solution. During onboarding notes would be passed over for sure and the AE joins initial calls, but the customer soon was working with a CSM with limited context into what their true objectives are. Plus, speaking from experience I would hate seeing others "ride coattails" of your hard work and not work the account properly.

2) The AE would know exactly where the upsell opportunities were, who to speak to about them, and when to best kick off the conversation. Since all upsells now were funneled to a team of one or two people, they never got the follow up they deserved and numerous upsell opps were lost.

The company had (and still has I'm told) a massive churn problem both on the customer and sales rep side.

You should not restrict your AE's from working with the customer after the sale is done, at least for a 6-12 month period. You're going to miss opportunities for growth and retention if you do restrict it.

Sunbunny31

Politicker

1

Sr Sales Executive 🐰

Solid points here!

thesalesman

0

Senior Director of Global Sales

Hmm interesting. One thing this would lead to is the reduced pace of net new logo acquisition as AEs would want to focus on expansion and that makes sense.

Thinking if it may be solved by reducing the number of accounts an AE holds.

Gasty

Notable Contributor

1

War Room Community Manager

Compensate New Business additionally for a new logo? Expansion team won't get that since they're working on the same logo.

Maximas

Tycoon

0

Senior Sales Executive

Exactly.

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