The Latest from SaaStr: Be Thoughtful with Clawbacks and Tracking to Cash

So there are 3 things every sales rep I’ve worked with hates:

• Clawbacks.  When they have to give back some of their commission if a customer cancels early.
• Tracking-to-Cash, i.e. paying commissions once cash is received, not just once the deal is signed; and
• A Low Base Salary, No Matter How Much They Make. We won’t dig into this too much here, but sales folks hate it.  Even if their effective comp is 3x, 5x, even 10x their base.  They just hate having a low base salary.

Let’s dig in a bit here, and I’ll at least share my learnings. I think all 3 are useful tools, but you need to be thoughtful about using them and not accidentally abusing them and creating more friction with your team than they are worth.

We all know which companies are “the best,” but we don’t always take a real look into what keeps them at the top. Capchase Co-Founder & CEO Miquel Fernandez and 01 Advisors VP Kristen Clifford use data to show us what differentiates the best SaaS companies from the rest.

The top SaaS companies are growing really fast, roughly at twice the rate of their peers.

The top quartile companies at the 1 to $3 million ARR mark grew at 160% year over year versus 100% for the median company. At the 10 to $15 Million ARR mark, the top quartile company grew at 100% year over year versus 45% for the median.

This edition of the SaaStr Daily is sponsored in part by SAP

Your business can thrive with agile and innovative solutions to help automate business processes to scale your business. SAP Cloud ERP is at the core of making these capabilities come to life and helping your business grow.

The time comes for every growing SaaS company when you need to hire your first managers.

Not VPs, but Directors and managers under them. 

Some rough rules:

• You need one Sales Director for each 8 sales reps.  Your VP can’t directly manage more than 8.
• You need one SDR Director for each 10 SDRs.  Each 10 SDRs, even 8 ideally, need a manager.
• You need one Director of Eng or team leader for each 8 engineers.  The rule of 8s, again.

As you scale past $5m-$10m, you as a founder and/or VP need to make sure you are putting this layer of management in place.

If you don’t, you won’t scale. It may take a quarter or two to show up, but no one should be managing more than 8 reports.

So one recent survey we did really brought out a healthy debate: 

does your VP of Sales really need to be a product expert?

Many of the comments said it was more important a VP of Sales understand process and leadership more than the product itself.  That others like Sales Engineers and the product team can fill in the blanks on the product during a sales process.

Maybe.

Here is what I do know: at least for any startup under $20m-$30m ARR, and probably under $50m ARR, I see VP of Sales fail when they don’t understand the product.

This edition of the SaaStr Daily is sponsored in part by MERGE

Merge’s Unified API allows you to access 150+ integrations across HR, payroll, ATS, accounting, CRM, and ticketing systems.

Up Next: Wednesday, March 29th @ 10AM

Topic: How to Scale Your Go-to-Market Strategy at Every Stage of Growth

Speaker: Roland Dennert, Managing Partner at Cipio Partners

Workshop Wednesdays is new series where we’ll be bringing some of the best SaaStr speakers to you LIVE, every Wednesday. 

Each workshop will be hosted in a live, interactive 30-minute format at 10am Pacific each and every Wednesday. This workshop will be 100% LIVE, not pre-recorded, and will be hosted in an, interactive 30-minute format, including Q&A.

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