What is the standard commission rate for SaaS sales?

Past Graham Collins • Jan, 2021 • 4 mins

I wish there was a standard commission rate, I really do. Given I spend and so much of my time discussing commission rates with sales leaders and sales reps, this comes up a lot. Equally with well-nigh questions related to sales compensation, there is a curt reply and a much longer answer. Strap in, here we go!

What is the standard committee charge per unit for SaaS sales?

x%. The standard commission rate for SaaS sales is 10%.

If that'due south all you lot came for, thanks for checking out my weblog! If you want a flake more context, here y'all go.

There's a reason that committee calculators generally start at 10% committee rate for salespeople. This is considering of two major rules in compensation plan setting.

Standard commission rate rules

Dominion 1: 50/50 split between base salary and commission. When looking at OTE (On-Target Earnings), the majority of bounty plans take half a rep's earnings being base salary and the other half existence commission. While at that place are exceptions, this is the standard rule of pollex.

Dominion ii: 5x Quota:OTE ratio. This is a little more complex. If you accept a rep's annualized quota and split up that past their OTE, you lot'll come up up with their Quota:OTE ratio. The rule of thumb is that this should be between iv and six.

If you put these two rules together, y'all'll meet where we come up with x%. Here's an example:

A sales rep has an OTE of $120,000. They earn a $60,000 annual base bacon and accept an expected commission of $lx,000 annually if they hit their quota. That's the l/fifty divide. Their quota is $150,000 per quarter, meaning they take a $600,000 annualized quota. That'southward the 5x Quota:OTE ratio. And so if they striking their $600,000 quota they earn $60,000. $600,000/$threescore,000 = 10% sales commission.

More than complex commission rate considerations

Okay, so you don't live in a perfect sales world. Your bounty program is not as uncomplicated every bit what I laid out to a higher place. Your base of operations salaries are 60%, your quota ratio is 6.1x, you lot work in manufacturing selling appurtenances. Let's tackle these ane at a fourth dimension.

Base salary isn't l% of OTE

Every bit I mentioned, the bulk of salespeople have a base salary that is fifty% of their OTE. Nevertheless, there are instances where the base salary might be higher or lower than 50%. If the base salary is higher than l%, you lot should await a lower committee rate. Conversely, if the base salary is lower than fifty%, expect a higher commission rate.

Quota:OTE isn't 5x

When I accept comp plan consult calls with sales leaders, it'due south really adequately rare that a salesperson's quota is exactly 5x their OTE. If your revenue is less than a one thousand thousand dollars, it's likely you have a 3x or even lower. So if you're just building out a sales squad, don't fret. If your acquirement is above a billion dollars, you probably take an 8x or college multiple. The lower that multiple is, the higher the commission charge per unit is going to be.

Not a SaaS business

I gave the instance of manufacturing above, but maybe your industry is services or goods instead of software. If your cost of selling is college or your customer acquisition cost is very high, you're likely to have a lower commission rate by necessity. For example, if you demand an employee to run onboarding, you need an employee to handle the service, and you need a whole team of contractor staff to practise data entry, your expenses are going to exist higher. Considering your costs are and so high, your commission charge per unit needs to be lower.

There's no exact template that lays out the perfect commission rate for every concern and every manufacture. So you have to take a lot of things into consideration as you lot're building a compensation programme.

Fortunately, our team at QuotaPath congenital a wonderful tool for figuring out quotas, OTE, and committee rates. Check out our sales compensation calculator here.

And once yous figured out the right committee rate (or commission rates!) for your sales squad, check out QuotaPath. We automate the committee calculating and quota attainment tracking for yous.

Updated on January, 2021

Sales