We do about $1Mil in sales for our SaaS B2B product. The average deal size is $3-5K, however we have smaller deals for less than $1K and larger deals of $10-15K. To make things worse, we have both monthly and annual subscriptions, so have to deal with compensation for recurring payments. What are the best practices for setting up compensation for inside sales in this environment?
It all depends what kind of deals you want to attract. It is healthy to have a good mix between smaller and bigger deals. Bigger deals are often more time consuming and from a risk perspective quite dangerous. I have seen many companies go bust because they lost their biggest client. Revenue is a bit like a layercake. You want some bigger deals and lot's of smaller ones. The bigger deals are your spungecake layers and the smaller ones are your filling.
I would therefore suggest to pay out a fixed fee whenever a small deal is signed (this will incentivize your salesforce to sign the small deals that you need to decrease revenue volatility and not waste their time on very big deals). At the same time you do want to reward signing bigger deals. All deals big and small should therefore count towards a set revenue target. The trick here is to implement ramps, decelerators, and accelerators. No compensation is payed out when all deals combined remain under 60% of the set target, from 60-100% of target your compensation follows a linear function, from 101% you pay out following an exponential function.
I'm happy to schedule a call with you to discuss all this in more detail. Do not hesitate to contact me.