The War Room
Question
Post

Should the total value of multi-year SaaS deals count towards your current year quota?

Some say that only the deal value attributed to the current year should go towards quota.


Others say the total deal value should be paid out on their first years quota.


What do you say?

How do clients pay for a multi-year deal?
Attached poll
*Voting in this poll no longer yields commission.
πŸ’° Compensation
πŸ€·β€β™‚ Poll
🀠 Culture
15
goose
Politicker
+12
Sales Executive
Your question is about quota relief and your poll pertains to how clients pay. Β I know these are related but what are you after? Β I'd like to see a plan where sales people are paid commission when the client pays. Β If they pay in one lump sum then pay the rep that way. Β If they pay monthly then pay the rep monthly. Β Commissions are a cost of doing business and a business shouldn't be expected to float the rep if they aren't making money.
braintank
Politicker
+6
Enterprise Account Executive
I'd hate to get paid monthly. If I book a year contact with quarterly payments I want all my money now, not whenever accounting gets the check.
goose
Politicker
+12
Sales Executive
That's an interesting perspective. Β I wonder how many businesses would succeed with the same thought.
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funcoupons
WR Officer
+11
up in Fiji, under paddy
Even though it would be awesome to get paid all up front as a rep, it doesn't really make sense given a client could cancel a multi year contract.Β 
Rallier
Politicker
+9
Account Executive
Don't you think that if a client cancels that's more on customer success? Why would the sales rep be punished for poor customer service?
ch
chadilac
Praised Answer
+1
Sales Director
If it was over sold, promises made that couldn’t be kept.
CuriousFox
WR Officer
+11
Senior Account Executive
A couple of thoughts here.

Quota. Let's say you close a 1M deal over a 2 year contract. Your boss will immediately send that win email to your team as well as the higher ups so you receive your "atta boys" and are acknowledged for your hard work.Β  Let's not pretend that doesn't feel nice πŸ€·β€β™€οΈ

Payout could be your monthly commission until the term of the contract. I'm not saying a lump sum couldn't happen. What if they add features or equipment within the two years? What if you're a hunter who only gets paid on the first 12 months of a new logo? Basically I could see arguments either way.Β 
slaydie
Politicker
+5
Account Executive
I would love to get paid out a lump sum of a 2 year deal I sell or even I'd take commission paid for year 1 and then year 2 (as long as the rep was still there) BUT I've sold a few multi year deals and that's not how it works at my company. You get paid out on ACV not TCV and get a bit of an extra kicker if its 24+ month contract. Truthfully not really much of incentive to sell a multi year deal but sometimes you got to do it.


I believe the AM gets commission on the 2nd year part of the deal since they maintain it.
paddy
WR Officer
+10
Account Executive
Doesn’t matterΒ 
braintank
Politicker
+6
Enterprise Account Executive
You might end up running your business into the ground if you pay out TCV on multi-year deals day 1. You end up with a lot of cash going out the door. And what happens if the customer cancels after year 1 of a 5 year deal?
SalesPharaoh
Politicker
+8
AM BDR
I said portion because I don't sell product but a service so my bonus is varied based on the consumption. So if I signed say 100k over the year I usually get it per quarter based on the actual consumption divided monthly.
CaneWolf
Politicker
+12
Call me what you want, just sign the damn contract
You should get compensated for those extra years (I've seen 1% commission a few times) but I don't think it should necessarily hit quota.
Lambda
Politicker
+6
Sales Consultant
So if you are inheriting a MY client then you should only do so at the end of that term IMO this way the rep who sold the deal gets full commision on the year they support then its your role to keep business going and get new renewal so you do the work, you get the pay.

That said, i dont think MY contracts should be moved unless the salesman moves on or moves up.....

Basically if you are going to have the responsibility of supporting and renewing it then yea it should be a part of the quota
harebrained
Opinionated
+4
Enterprise Account Executive
We get quota credit and full commission on Year 1, and then 25% of our standard commission rate on Years 2 and 3 (no quota credit) - all paid up front. Ex. a 3 year deal (assuming no cancellation clause) pays 1.5x compared to a one year deal, and customers pay annually.Β 

Other jobs paid full commission each year as the next date/invoice hit - higher overall pay but leaves you with golden handcuffs.
JustGonnaSendIt
Opinionated
+4
Burn Towns, Get Money
For multi-year agreements, it's important to understand what the termination clauses look like to determine how commission / attainment should be credited.

IF the customer can easily terminate the service, that's more risk to the company. So it's unlikely they would pay out for the TCV without some kind of clawback provision. This is where you'd likely only get paid on the ACV.

However, if it's difficult to get out of the multi-year contract, it's an easier argument to pay on TCV or some portion of the TCV.

At my company, it's very difficult to get out of a multi-year SaaS contract. I get 100% quota attainment for Year 1, and 75% attainment for Years 2 and 3. We only sell max term lengths of 3 years.

So, I get comped on most of the TCV, with a portion taken out to balance risk with the company. There is no clawback provision if the customer exits the contract during the term, since it's basically only going to happen thru bankruptcy or a force majure event.

Another consideration is renewals. Are reps paid on renewals? Or only new logos?Β 

If reps are only paid on new logos, the argument to pay out on TCV vs ACV is stronger. This encourages them to capture more revenue up front and improve ARR forecastability for the company.

If reps are paid on Renewals, it might be easier to argue against paying on TCV vs ACV, but then you'll just end up with reps selling 1-year deals. A counter to this is to give future-year quota credit for the out-years of the contract. But then the rep is gambling that they'll still be employed to collect that commission / attainment.

Lots to think about and many variables.Β 

Overall reps should be incentivized to sell multi-year agreements, and that means paying them for TCV in a timely manner. The value of ARR to companies (usually 10X valuation multiplier VS revenue) far exceeds the risk of paying commission.
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