When you explore a channel sales model, you will see that the company sells through a third partner. These are known as affiliate partners, who gain commission on every purchase that is made. You also have resellers and value-added partners. Value-added partners are providers who will bundle your product with their own. Either way, with channel sales, you are relying on a third party to sell your product or your service. This can include resellers, distributors, or anyone who doesn’t directly work for your own organisation.
Why are Channel Sales so Efficient?
With channel sales, you have a level of built-in trust. If your partner is already well-known in a specific vertical or market then you don’t have to do all of the work when it comes to building a presence or establishing a brand. Your product will be credible because of their endorsement alone. One channel manager paired with multiple partners can bring in the same revenue as five or even six salespeople, but at a fraction of the cost. It’s also much easier to bring in partners when compared to salespeople. Lastly, if your customers need training, implementation support, or even onboarding, then partnering with a vendor who can offer this service is the ideal way for you to close more sales.
SaaS Sales Compensation Models – Explained
There are numerous compensation models available to those who work in SaaS. The average pay for SaaS reps is between £25,000-£38,000. A common percentage is 10% of the gross sales, but it can be more depending on the product you sell. You can have a lower commission percentage for any revenue that happens to be below quota.
Commission Only
This model is ideal if you’re in the start-up phase. You won’t be getting much funding, so you can only pay your reps with what you bring in. You won’t have to pay taxes for your commission-only employees either. The harder they work and the smarter they are, the bigger their commission will be. It’s very flexible.
Base Salary + Commission
You will give your salesperson a certain amount as a salary. Your sales rep will feel much more confident and secure, and you will also be able to gain confidence knowing that they have the potential to take your model to new heights through their own experience and dedication.
Profit Commission
You will pay your SaaS salesperson based on the amount of net revenue you bring in. Your sales reps should learn how not to give discounts all the time and they also have the potential to close many more deals. If your sales team is closing 6-figure deals or if you have low operational costs, then this is a good option.
Tiered Commission
In this case, you will offer X commission for your team if they do not exceed a certain quota. If they do exceed then you will increase this. In other words, those who outperform are rewarded generously. By having a tiered commission plan, you may be able to increase the rate to 7% when a rep is able to surpass £80,000 in sales.
Do Account Executives Typically Get Any Commission On Channel Sales?
The answer to this question is yes and no. It ultimately depends on the type of sales you are making, the type of commission you are offering, and your overall business model.
Should Someone who Works as a Channel Sales Manager be Incentive Eligible?
This will depend on the amount of customer contact they have, your revenue goals, your territory, and accounts or even the steps they take during the sales process. If the role happens to have these attributes, then this would make them sales incentive eligible. If the sales manager does not have these attributes, then they would most likely be eligible for the annual management plan.
Do Managers Always Get Commission?
Account managers shouldn’t really be commissioned for maintaining their order volume but it is common for them to get a commission on account growth if it is incremental in volume. They can also get a commission on any new product introductions or if they deliver on any cross-selling opportunities. Account managers can get the commission paid if they change up the mix on the same volume of goods. An example of this would be if they increase the volume on a higher margin product but lower the volume on lower-margin products. They would then get a commission if the total volume remains the same.
Do Account Executives Typically Get Any Commission On Channel Sales?
It really does depend on what stage your company is at, and the goals you have for the future. Working with a channel can be a very strategic decision for your company, so you need to make sure that you vet them and that you also ensure that they are able to do more than just provide leads. Some of the reasons why you might not give a commission are because they can give you a massive reduction in terms of customer acquisition, or because the channel is doing well on a consistent basis. Some of the pros of giving commission include the fact that if your first channel relationship is a success then you will be able to attract others in the future.
The answer really is dependant on you as a company, it makes sense to pay AE commission if they own territory and are working with a partner to increase revenue their and the partner is working with smaller accounts to increase sales whilst the AE is working larger revenue accounts, again its more down to your focus are you looking to grow MRR but not show a profit in year one? Let us know your thoughts?