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SaaS Sales Compensation Survey 2020

SaaS Sales Compensation Survey 2020

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Our 2020 Survey on Sales Compensation in Israeli SaaS Companies revealed valuable insights about both the matureness of the Israeli industry in the past two years as well as the the effects of COVID-19. We encourage the industry to use this survey as a sanity check tool for CEOs, CROs and CFOs to see where they stand vis-à-vis their peers.

Our 2020 Survey on Sales Compensation in Israeli SaaS Companies revealed valuable insights about both the matureness of the Israeli industry in the past two years as well as the the effects of COVID-19. We encourage the industry to use this survey as a sanity check tool for CEOs, CROs and CFOs to see where they stand vis-à-vis their peers.

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SaaS Sales Compensation Survey 2020

  1. 1. 1 | © All rights reserved to Viola 2020 Annual Survey 2020 Sales Compensation In SaaS Companies – COVID Edition
  2. 2. 2 | © All rights reserved to Viola 2020 FOREWORD In this year’s survey we had over 40 companies participating, so we are satisfied with the statistical accuracy of the results. While we encourage companies to find the right solution for them, unfortunately we still find that too many companies are re-inventing the wheel and spending time and money on issues for which the industry has already reached an equilibrium. We encourage the industry to use this survey as a sanity check tool for CEOs, CROs and CFOs to see where they stand vis-à-vis their peers. We will continue to update this survey every year. Please send us your requests or comments and we will try to incorporate them in the next version. We are happy to share with you an updated and expanded survey about sales compensation metrics in Israeli SaaS companies, which was conducted in September 2020. In this edition we have examined both the matureness of the Israeli industry in the past two years as well as the implications introduced by the effects of COVID-19 since March 2020. The survey’s results highlight the convergence of Israel’s sales compensation KPIs with the global benchmarks, as well as the rise of Customer Success involvement in the renewal and expansion processes. Other than temporary implication on budgeting and hiring processes, we believe that COVID-19’s most significant effect was in educating companies (both as sellers and buyers) to close large-sized deals remotely.
  3. 3. 3 | © All rights reserved to Viola 2020 Company Size WHO TOOK THE SURVEY Primary Sales Strategy Primary Business Model 21% 40% 28% 12% Under $5m $5m - $15m $15m - $50m $50m+ 42% 35% 23% Field sales Field sales AND inside sales Inside sales 88% 7% 5% Subscription Subscription AND transactional/unit Transactional/unit
  4. 4. 4 | © All rights reserved to Viola 2020 33% 26% 42% 26% 17% 16% 13% 8% 19% 2018 2020 >$1,100k $900k-$1,100k $700k-$900k $500k-$700k $350k-$500k Since our 2018 survey, there has been a significant shift towards higher quota ranges (>$700k), as we see nearly 50% of the respondents reporting these levels, compared with only 25% in 2018. This increase could be the result of companies gaining more confidence and expertise in their business models over time. However, this could also potentially reflect the impact of COVID and the ability some companies demonstrated to close large- sized deals remotely. It is worth mentioning that 90% of the respondents reported no change to their on-target inside sales quotas post COVID-19. Annual quota for INSIDE salesperson **Answers are in new Annual ContractValue (ACV) *Refers to the range of $700k-$1,100k
  5. 5. 5 | © All rights reserved to Viola 2020 Annual quota for FIELD salesperson As with inside sales, we identify an increase in field’s annual quotas towards the >$1,200k range. Yet a more significant trend discerned here is the market’s consolidation around quota ranges between $1,000k-$1,500k, which is in line with US and global benchmarks. This trend could be explained by companies’ matureness and confidence in their business models, and it is also derived by companies’ adoption of a hybrid sales strategy, i.e. operating both inside and field sales. As inside sales quotas go up (as we have just shown), so do field sales quotas. In this case, approx. 70% of the respondents reported no change to their on-target field sales quotas post COVID-19. The rest reported a reduction to some extent. **Answers are in new Annual ContractValue (ACV) 9% 15% 18% 12% 45% 32% 32% 27% 9% 2018 2020 >$1,500k $1,200k-$1,500k $1,000k-$1,200k $800k-$1,000k $700k-$800k
  6. 6. 6 | © All rights reserved to Viola 2020 New ACV commission rate Compared with the 2018 survey in which we saw a high variance in the commission rates for new ACV, we are now seeing the market consolidating at anywhere between a 7-10% commission rate, which is in line with global data. The adoption of the ASC 606 accounting standard has created a lag between when commission is actually paid and when it is recognized as an expense in the financial reports. Companies are advised to reconcile these differences when planning ahead. 9% 7% 36% 24% 9% 24% 45% 44% 2018 2020 > 9% 7% - 9% 5% - 7% 3% - 4%
  7. 7. 7 | © All rights reserved to Viola 2020 Renewals commission rate Similar to the 2018 survey, we see over 50% of companies grant a certain commission for renewals that is substantially lower than the new ACV commission. This survey indicates that the market is now adopting a 2-3% commission rate as a standard, in line with global benchmarks. We were surprised to find that over a third of companies are not paying any commission on renewals. This increase could possibly be explained by the shift in ownership of renewals from Sales to Customer Success, as we show next. We believe that this is not sustainable in the long term. *Refers to both the ranges of 2%-3% and >3% 24% 36% 53% 38% 17% 24% 10% 2018 2020 Same as new ACV > 3% 2% - 3% No commission at all
  8. 8. 8 | © All rights reserved to Viola 2020 Base/OTE ratio A Base/OTE ratio of 50/50 is the standard worldwide, and for the most part this holds true in Israel as well. Most deviations from the 50/50 standard lean towards the base at a 60/40 rate. This is mostly the case when the sales team is located in Israel. We believe that eventually this will converge into the standard 50/50 allocation. 68% 22% 5% 2% 2% 50/50 60/40 70/30 30/70 40/60
  9. 9. 9 | © All rights reserved to Viola 2020 Renewals ownership Over the past 2 years, Israeli companies have significantly matured in their ability to make use of Customer Success teams and to compensate them accordingly. Compared with less than 50% in the 2018 survey, we are now seeing Customer Success teams running the renewal process in 63% of companies, leaving the Sales teams to focus on acquiring new customers. *Excluding <5% that responded “Account Management” 47% 63% 53% 38% 2018 2020 Sales Cusomer Success team
  10. 10. 10 | © All rights reserved to Viola 2020 Expansions ownership As in renewals, we see a decline in Sales departments’ sole ownership of expansions. Instead of shifting ownership directly to Customer Success, we see that companies have formatted a new structure where Sales and Customer Success teams work hand in hand to manage expansions. Compared with roughly 35% in the 2018 survey, we are now seeing Customer Success teams involved in expansions in almost 60% of companies. *Excluding <5% that responded “Account Management” 67% 35% 6% 35% 28% 23% 2018 2020 Customer Success team Customer Success AND Sales Sales
  11. 11. 11 | © All rights reserved to Viola 2020 Multi-year deal accelerators Contrary to what we saw in 2018, this survey has revealed that Israeli companies are developing a deep understanding of the SaaS model. Most have moved from Booking/TCV-based compensation models to an annual basis baseline and are using more sophisticated methods to compensate for multi-year deals. 43% 26% 23% 5% 3% Yes, but we provide reduced commission for 2nd and 3rd year Yes, but only if the customer pays up-front for the entire contract period No. We compensate for ACV only Of course. The entire commission plan is based on TCV and not ACV N/A*Based on January 2020 survey results
  12. 12. 12 | © All rights reserved to Viola 2020 Commission payment timing We were a bit surprised to see that there is no significant change in the timing of commission payment. It seems that in this particular case, Israel is still behind most of the US benchmarks that we are familiar with. In Israel, there is a higher percentage of companies than expected paying commission upon P/O and not waiting for collection to arrive. We believe this has significant implications on cash flow, and we advise companies to review their commission payment timing methods. *Based on January 2020 survey results 30% 27% 27% 8% 5% 3% Upon Collection Upon invoicing the customer Upon receiving the P/O Partly invocing, partly collection 60 days after receiving the P/O Quarterly booking
  13. 13. 13 | © All rights reserved to Viola 2020 COVID-19’s impact on sales departments 65% of respondents reported that they were required to cut their sales budget to some extent due to COVID-19’s direct impact on top line and/or uncertainty about future implications for the business. This cost reduction was more evident in future hiring of new salespeople, as close to 80% reported they delayed or stopped all hiring (58% have already renewed hiring processes since), while about 60% had no reduction in force (RIF) of salespeople. We see that most of the companies that had to cut more than 10% of their sales budget (43%) were also the ones to layoff accordingly. An interesting finding shows that for most companies surveyed, the sales cycle remained the same or improved. As we would expect, a prolonged sales cycle is correlated with a field sales strategy. 35% 23% 19% 12% 12% Sales Budget Cut None < 10% 10% - 20% 20% - 30% > 30%
  14. 14. 14 | © All rights reserved to Viola 2020 COVID-19’s impact on sales departments 58% 9% 7% 14% 5% 7% Salespeople RIF None < 5% 5% - 10% 10% - 20% 20% - 30% > 30% 27% 29% 24% 15% 5% Sales Cycle No change Improved Increased slightly (<1 month) Increased significantly (1-3 months) Increased dramatically (>3 months) 58% 19% 21% 2% Salespeople Hiring Delayed hiring until the situation clears out, but have already renewed Stopped all hiring immediately to cut expenses Continued as planned Expedited hiring to boost sales
  15. 15. 15 | © All rights reserved to Viola 202015 | © All rights reserved to Viola 2020 www.viola-group.com

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