Hey SaaStr Community,

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

#1 Clawbacks. When they have to give back some of their commission if a customer cancels early.

#2 Tracking-to-Cash, i.e. paying commissions once cash is received, not just once the deal is signed; and

#3 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.

Let’s start with Clawbacks.  Everyone in sales hates them.  They don’t want any risk they have to give back part of a commission.  But two thoughts:

First, clawbacks rarely are that big of a deal in the end in terms of comp impact.  Most customers pay, and most pay on time.  It’s rare to see clawbacks impact even 5% of a rep’s comp.  That’s both an argument not to do them, and to reps, not to overly worry about them.

But … here’s the thing …

I find clawbacks one of the most powerful tools to mitigate churn-and-burn deals.

Clawbacks don’t stop low quality, churn-and-burn deals.  But they are a clear sign to the sales org that there is at least a cost to closing low-quality deals. 

A lot has changed in SaaS. 

Times are tougher for many now, and the risk of failure can seem more tangible these days.  I haven’t failed yet, but boy every time, I’ve come close.

So I thought I’d update a list of the “little things” I let go, but that I shouldn’t have, that almost killed me/us.

Setting a little too insane of a goal. Crazy goals are good, but I wonder about insane. At Adobe Sign / EchoSign, I said we’d do $2m ARR by the end of Year 1. We ended up at $200k in ARR.

Not terrible 1 year from launch, looking back, especially by the standards of the time. But the team was dejected and broken. One cofounder quit. Another fired another one. I thought we could do it, though. But I should have stress tested that assumption a little more. This cost me one of my cofounders, and some of the engagement of another.

Not paying myself a salary — for a little too long. Once we were in trouble, I stopped taking a salary, and reinvested a bunch of the proceeds from my first start-up to keep us going. That was OK. But I took it a little too far.

I did it a little too long. This gave me an excuse. To do OK, but not to kill it. After all, I wasn’t taking a salary! Pay yourself once you can afford to. This cost me some of the urgency I needed — once things finally got good!

Communicating with challenging teammates a little too little. I still struggle with how to maintain a constant flow of communication with folks I lack alignment with. I do dailies every day with the folks I’m aligned with, but I tend to shrink away from constant communication with folks I have disalignment with.

This doesn’t work.

You have to flip it around. You can save team members, or at least extend their lifetimes, just by communicating better, more often. This cost me several key team members leaving 6–9 months earlier. I would have loved to have had them longer. 

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So on our 5 Interesting Learnings series we try to mix it up with a combination of how “hero” companies are doing, like Monday, HubSpot, GitLab, etc. … how some ones you are doing that you might know less well are doing, like Doximity, Bill (when we first profiled), … and then how some you may have even forgotten about are doing.

Like Blackbaud.  It’s a real oldie in educational and nonprofit software.  It was founded in 1981 (!) and IPO’d in 2004 (!), and transitioned into SaaS later and through acquisitions, and then into a broad platform for fundraising and educational management.  $100 Billion has been fundraised on its platform.

Fast forward to today, it’s at $1B in ARR, growing 14%, cash flow positive (24% non-GAAP EBITDA), and worth a so-so $3.4 Billion.

A story of a sloooow path to $1 Billion in revenues.

And of a segment of the economy that is more resistant to the macro effects many of us are experiencing — non-profits.

SVB failing was a stunning moment in the history of startups.  Stunning,m and I think, actually still underdiscussed.  As SVB’s situation appeared to be deteriorating, I thought based on ‘08-‘09 they might get acquired, or back stopped, or bailed out in some fashion.

I never thought on a Friday morning I’d see a tweet the bank had been shut.  A bank.  The bank.  The bank startups had used for decades.  Shut down, like the Great Depression.  Locked the doors, everyone sent home.

So … where did startups that took out their cash put it?

Kruze Consulting has some great data.  They act as trusted outsourced finance teams for 100s of startups, including some of my investments.

The winner by a large margin appears to be JP Morgan Chase.

It turns out a well-crafted sales and well-designed comp plan does retain sales reps fairly well.

Why? Well, if the comp plan is well put together, then:

• If a sales rep leaves, they sort of have to start all over again earning their bonus, unless they get a draw. And even a draw isn’t perfect.  A standard AE comp plan is often 50/50 base/bonus.  If the AE is already making 100%+ of their OTE, or even more because they are a top AE (say 150% of their OTE) … they really have to almost start from scratch when they go somewhere new.  Especially if sales cycles are longer.
• Top sales reps should make a lot of money. Just the top ones. So if they leave, it’s too risky to try to earn that amount somewhere new.  Again, if you are making well above 100% OTE at a good startup, it’s just risky to think you’ll surely do that again at some next startup you barely know.
• Top sales reps tend to build up a strong pipeline of deals that will close over time. This destresses their life significantly as they have a lot of visibility into deals that will close — and personal and financial success. Top reps don’t want to leave that pipeline behind.  It’s just a lot of work to build it up again.  And it again introduces risk.

So what’s key here?

We’re just 10 weeks away from SaaStr Europa in London, June 6-7!

As always, we have an amazing agenda for you! Here are just a few of the top SaaS leaders that will be speaking.

Protect your business against lost revenue, compromised customer confidence, and reduced competitive advantage.

Sign up for hCaptcha Enterprise’s complimentary traffic analysis to uncover the fraud and abuse that is targeting your company. 

The challenges businesses face at each growth stage, from a $1M company through $100M and beyond, are quite different. 

Xero’s Global Chief Strategy Officer, Damien Tampling, takes a philosophical look at some aspects and nuances to consider wherever your business is on this journey. Over the last couple of years, Xero has doubled revenue and operating revenue, tripled annualized monthly recurring revenue, and quadrupled lifetime value. Let’s dive into some of Damien’s top learnings for building a global platform and ecosystem.

DemandScience is looking for an Account Executive who will manage a portfolio to include the development of business plans and implementation of sales strategies in partnership with Customer Experience Managers to enable the sale of global B2B data solutions.

Make is seeking a Business Development Representative who can identify the right stakeholders and budget holders within prospective customers and create tailored messages to consistently generate high-quality opportunities.

• SaaStr 646: The Secrets to Building a Global Platform and Ecosystem with Xero Global Chief Strategy Officer Damien Tampling
• SaaStr 645: Why GUIDEcx is Betting Big on In-Person Events with SaaStr Head of Partnerships Poya Osgouei and GUIDEcx Co-Founder and VP of Sales Todd White
• SaaStr 644: Lessons Learned in Scaling Early-Stage to Hyper-Growth Companies with Databricks SVP and GM Ed Lenta

Listen on Apple Podcast, Google Podcasts or Spotify

It can tempting to tweet about so many things

But you aren't those folks

You're a CEO of a startup Tweet about that, and your industry.

That's where you add value.

Leave grumpy tweets, generic outrage, etc., to those with less to get done.

Small talk with your top performers: fun and bonding

Small talk with low performers: brutal

Honest truth about venture:

25 active investments

15 boards

4 new deals a year

50 partner meetings a year

500 pitches a year

Really, isn't all that much time to help any one portfolio company

Not really

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