How to Write a Sales Bonus Plan for SaaS Account Executives

For reps to be successful, they need to have all the right tools and resources. One of those tools is the sales compensation strategy and bonus plan that you offer. Not only should this be goal-oriented and organized, but it also needs to be transparent so that your team knows what you have to offer. Sure, the office game room and flexible PTO policies are great, but give your sales team the incentive they want: a solid sales bonus plan. 

This plan will encourage sales, set clear goals, and explain to team members how they are paid for their efforts, including their base pay and any incentive pay (commission). For your plan to be effective, it has to cover all of these aspects. 

What your sales bonus plan should do

Creating a compensation strategy helps to clarify the goals that matter to company leaders and how those goals are translated into the various efforts put forth by your account execs to paint a clear picture. It should set clear standards and outline how the business goals align with actions taken by the sales team. And of course, it needs to spell out how your sales team is going to be rewarded for meeting these goals. 

Common goals in the SaaS world include things like:

• Booking recurring sales revenue
• Signing longer contracts
• Getting cash up-front 
• Customer satisfaction
• Maximizing renewal rates

When you know what the goals are, you will be able to create a strategy that rewards people achieving these goals and outcomes. Plus, when you take the time to create a solid sales bonus plan, you’ll be able to budget more effectively. 

Whether you do your own accounting or you have an outsourced team, they will thank you for your clear, transparent compensation strategy. This makes it easy to account for and it removes any questions or uncertainties about compensation that could impact the budget. 

Consistency and opportunity 

Consistency is a must in today’s fast-paced business environment. With the growing number of SaaS companies out there today, turnover has become an issue for several of them. Employee turnover can impact even the best sales bonus plans, but more importantly, it’s noted that many employees leave because the compensation plans or sales bonus plans were either difficult to understand or just not rewarding enough to make the job worth it. 

This plan is your chance to create a consistent solution for customer relationship management. It’s also an opportunity to train and upskill your salespeople (and include that information in compensation plans) so that people see that they have somewhere to go. You’ll want to make sure that reps are familiar with your ideal customer profile, as well as your key metrics and business goals so that everyone can work together toward the same end. 

Sales bonus plan do’s and don’ts

Although there are a lot of standards and best practices out there, it’s often complicated to try to keep up with all the details. To save you the trouble, here are some quick do’s and don’ts that will help you stay on track. 

Do:

• Offer non-monetary rewards and incentives 
• Keep it consistent and clear
• Pay attention to your gross margins
• Focus on your annual recurring revenue 

Don’t:

• Get behind on hiring 
• Hire the wrong reps 
• Make sales reps collect payments 
• Compensate for renewals 

The difference here is that healthy SaaS sales will focus on retaining customers for many, many years to come. Therefore, your compensation and bonus plans need to reflect that ultimate goal. 

Individual and team plans 

There is also the need to distinguish between individual and team bonus and compensation plans. You will first want to create a model of the individual bonus plan so that you know what you will be paying each employee. Then, you can move on to team plans that cover the entire sales team and their efforts to build profits and draw in new business. 

In your individual plans, you’ll want to include pay amounts and rates for things like:

• Base pay
• Variable/incentive pay 
• Quotas 
• On-target earnings 
• Commission rates 

If there are other elements in your sales bonus plan, include those as well. Then, you’ll need to take the next step and calculate how your individual plans factor into creating team plans.

A team plan will include your maximum quota capacity (QC), or how much your entire team is expected to sell/generate. For example, if your individuals are held to a quota of $200,000 and you have a sales team of 10 people, your QC will be $2 million. 

Example of a SaaS account executive compensation/bonus plan 

Now that you have a better idea of how to create a bonus plan for your sales execs, let’s take a look at what that might look like on paper. 

‍

XYZ Company: SaaS Account Executive Compensation and Bonus Plan

20XX U.S. Compensation Plan for Account Executives

Employee Name 

‍

1. Period: This compensation and bonus plan is set for the 20XX fiscal year, which begins on [date] and ends on [date]. 

2. Territory: This Account Executive will be responsible for selling accounts in [territory/audience]. They will be responsible for all new and existing accounts which you are assigned. 

3. Terms: Performance will be measured on a [monthly, bi-monthly, quarterly, annual, etc.] basis. 

4. Compensation: Your compensation includes a base pay and commission rate for variable sales, as explained below. 

• Base Salary
• Variable Pay
• Quota(s)
• Payout Components
• Payout Frequency

‍

5. Acceptance: The undersigned agrees that all information in this sales compensation plan is correct and agreed upon by all parties involved, and will serve as a legally binding contract with the addition of a signature. 

Signature of employee

Signature of team leader/manager

While you’re managing your execs, who’s fielding the calls?

Clearly, you’ve got a lot on your plate with your sales executives and setting up compensation plans. Fortunately, you’ve also got support for the day-to-day operations of your business if you want it. The virtual receptionists at Smith.ai can help with things like lead intake, appointment scheduling, and even assisting with outreach campaigns to bring in those leads in the first place. To learn more, schedule a consultation or reach out to hello@smith.ai. 

‍