To drive growth and fortune to the company, it becomes necessary for the brand to focus on its sales velocity. Sales velocity is the rate at which the company is selling its product or service to bring in revenue. 

55% of high-growth SaaS companies credit much of their success to fast sales cycles and effective compensation plans. However, making fast sales is not everybody’s cup of tea. To enhance sales velocity, enterprises need to implement some necessary tips in their operations. 

With the right implementation of these practices, around 15% to 20% productivity was noticed by companies in their sales. So, you keep reading this article till the end to know more about them.

Understanding SaaS Sales Compensation

SaaS compensation is how companies reward their sales executives for the effort they put into the sales. Since SaaS has a recurring nature in the products, which means, one sale can bring recurring revenue, the salespeople’s compensations are a bit different from the typical sales.

It involves various different components that collectively set an amount as the employee’s salary.

Key Components of SaaS Sales Compensation

The SaaS sales compensation is designed differently from the traditional method. Here are key components broken down into parts that play their major role:

• Basic Salary: Each salesman has a fixed salary amount and a commission rate for annual recurring revenue (ARR). Speaking of fixed or base salary, it is usually kept lower compared to other job roles as commission holds a major share.
  
• Commission Structure: As mentioned earlier, the commission is the main contributor for an employee which can help him earn a fortune or a bummer by the month’s end.
  
• Performance Metrics: Like in any other industry, the performance of the employee has a huge influence on the amount one can get by the month’s end. These metrics include customer acquisition, customer retention, and other KPIs.
  
• Incentives in Upselling: If an employee is getting clients with flying colors, they might be rewarded with some incentives and bonuses. 

Tailoring Compensation to SaaS Models

The SaaS models for compensation must embrace the efforts and identify the positive changes. For a tailored compensation plan, the following points will help:

• Focus on Recurring Revenue: People working in the sales team can be rewarded timely with regular compensations. These rewards can be on a monthly or annual basis, also known as MRR and ARR, respectively.
  
• Incentivize Customer Retention: Retaining a customer rather than hiring a new one is pretty affordable for business when compared. Hence, the sales rep who helps you retain the same customer must be rewarded for helping the enterprise save costs.
  
• Encourage Upselling: When an employee crosses the target, provide higher bonuses and encourage their efforts.

The Importance of Sales Velocity

Sales velocity is made clear about how quickly a company generates revenue by analyzing how their quick deals and follows a particular path. The concept involves various factors that show how a sales team is closing the deal. 

The following is the formula for sales velocity: 

Sales Velocity= Sales Cycle Length / Number of Opportunities × Average Deal Value × Win Rate

Speaking of key components, they are listed down below:

• Number of Opportunities: Total number of leads and potential deals in the pipeline.
  
• Average Deal Value: Average revenue received per deal.
  
• Win Rate: The percentage of successfully closed deals.
  
• Sales Cycle Length: Time taken from initial contact to finalizing the sale.

Based on these metrics and calculations, the sales velocity brings a clear idea of how the team is performing time-wise.

Leveraging Sales Velocity Calculators

There are sales velocity calculators that can perform all the calculations by themselves within a flick. With that data, you can figure out the following aspects:

• Identify Bottlenecks: Calculators and find out the areas where the process often gets delayed. These bottlenecks are generally long sales cycles and low win rates.
  
• Optimize Sales Strategies: Sometimes, better leads, faster follow-ups, etc. leave a greater impact on sales. So, try evaluating your sales strategies accordingly.
  
• Set Realistic Goals: It is better to stay motivated by achieving realistic goals than be demotivated by unrealistic goals. So, aim towards the common goal of your enterprise and set realistic targets that can easily be achieved.
  
• Drive Team Performance: Sometimes, good leadership is what a team is lacking. Hence, take responsibility and drive your team’s performance by motivating them. 

Integrating Sales Compensation and Velocity for Optimal Results

Integrating sales compensation with velocity is paramount for getting the proper results you desire. Integrating these aspects might sound difficult to you, but indeed, it involves some extremely simple steps:

• Align Goals: Your plan must imitate the shortest and most reasonable path toward the common goal of the company. So, plan them wisely.
  
• Incentivize quick deals: As mentioned earlier, prioritize offering employees a good bonus or rewards if they quickly close the deal with clients.
  
• Use data insights: Data is the king, and provide valuable information about almost everything. Leverage data and make better decisions.
  
• Encourage continuous improvements: Invest in employee training, monitor their performance, and keep a check on their motivation to work harder and drive better results for their efforts.

Challenges and Considerations

Challenges are everywhere. So, keep yourself ready to face the following difficulties while you work on optimizing your SaaS sales compensation system in the future:

• Complex Sales Cycles: Sales cycles often involve complex paths to follow and a lot more stakeholders than any other branch. That is why the cycle often goes through multiple stages which make it difficult to understand and make decisions.

  

• Customer retention focus: As mentioned previously, retaining an old customer is much more beneficial for a business than going for a new one. So, make balanced efforts to provide exciting offers to new customers, along with maintaining service quality for old clients.
  
• Problems With Deals and Offers: Despite the fact that deals and offers often bring huge audiences, this surge is not guaranteed. Also, these campaigns are needed to be timed and strategized to avoid any possible losses.

Conclusion

Finally, optimizing sales in SaaS is not as complicated as many of you may think. However, there are some complications and stages that need to be monitored and kept track of, to ensure that every function of the machinery is smooth. 

This article shared some valuable information on the same subject. So, if you find it helpful, consider sharing it with your colleagues and peers as well.

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