Do sales commission clawbacks typically apply after a customer’s payment has cleared (e.g. if they ask for and are granted a refund) or only up until payment is collected?

This is an issue that will worry you a lot in the early days — but in the end, doesn’t matter. Some customers won’t end up paying. Yes, you can and should clawback the sales commission on those deals. But it won’t really matter. Because this isn’t very common. Customers rarely go through all the steps of a sales process, deploy a product into production — and then don’t pay. Because you can always just turn off the product … And if you pay sales reps a full annualized commission on monthly/quarterly deals, some deals won’t last a year or longer, and you may want to clawback part of that commission. But it won’t amount to all that much. Clawbacks usually end up being trivial in size and relevance to the org. Put them in your comp plan so you can rest easy that everyone is being treated fairly and Continue reading "Do sales commission clawbacks typically apply after a customer’s payment has cleared (e.g. if they ask for and are granted a refund) or only up until payment is collected?"

Do sales commission clawbacks typically apply after a customer’s payment has cleared (e.g. if they ask for and are granted a refund) or only up until payment is collected?

This is an issue that will worry you a lot in the early days — but in the end, doesn’t matter. Some customers won’t end up paying. Yes, you can and should clawback the sales commission on those deals. But it won’t really matter. Because this isn’t very common. Customers rarely go through all the steps of a sales process, deploy a product into production — and then don’t pay. Because you can always just turn off the product … And if you pay sales reps a full annualized commission on monthly/quarterly deals, some deals won’t last a year or longer, and you may want to clawback part of that commission. But it won’t amount to all that much. Clawbacks usually end up being trivial in size and relevance to the org. Put them in your comp plan so you can rest easy that everyone is being treated fairly and Continue reading "Do sales commission clawbacks typically apply after a customer’s payment has cleared (e.g. if they ask for and are granted a refund) or only up until payment is collected?"

My co-founder and I sold 40% of our company to our first investor for $1.25M. Is that too much to still be interesting to VCs?

No. It is close to the edge, though. I try to back into the following math — does the CEO own enough after the next round to still have at least 10% at IPO? If my math says no, then I generally try to grant the CEO extra shares when I invest — out of the pre-money. That is, in essence, a very modest restructuring. In some cases (it’s not common), where > 50% has been sold in an angel/seed round, the company will sometimes have to be restructured to get traditional venture financing. This can be stressful ? View original question on quora The post My co-founder and I sold 40% of our company to our first investor for $1.25M. Is that too much to still be interesting to VCs? appeared first on SaaStr.

Jettisoning the Assumptions of Last Year

Snowflake Image by Alexey-Kljatov.jpg There’s a crisis in the scientific academic world. It’s called the Replication Crisis. Scientists have found that they cannot replicate the results published by many scientific studies. The same thing is happening in the world of business. Over the last 15 years I’ve several hundred business books, and I’ve written one. Across those 15 years, one of the most interesting is a book called The Management Myth, which traces the history of management science back to its less than solid origins. The book illuminates the history of scientific management and Taylorism, and supplies evidence that much the original data underpinning these theories was fabricated. I was curious if this was a broader trend, and it may be. I found other cases. More recent examples include Scientific American [debunking the theory behind Jim Collin’s work, Good to Great. A team of academics failed to reproduce Kahneman’s work on social priming Continue reading "Jettisoning the Assumptions of Last Year"

What is the smartest thing someone has ever said to you?

You need to manage people. I went fairly far, fairly quickly as an individual contributor. Even one that had several folks “reporting” to him. But I hadn’t really managed a team. One that I didn’t really want to manage. One that didn’t really need to do everything I told them to do. One that performed functions and did things I didn’t really understand. Put differently, I had been a team lead, and I had managed outside resources — but I had not been a true manager of employees. I had a boss that gave me that shot. He handed me a functional area I didn’t really want to manage. He said I needed the experience to grow. I turned it down. I didn’t want to do it. Then I slept on it, and 2 days later said he was right, and would appreciate the opportunity. Management is a set of Continue reading "What is the smartest thing someone has ever said to you?"

Is it better to sell a startup with an investment banker or directly via the founders (value below $20M)?

It is always better to use an investment banker. I’ve done it all different ways (with a banker, without, and sort of with). You are going to always lose without a banker — because you need a 3d party to help you get the best >realistic< deal out of a complex set of outcomes. Best case, you will be directly negotiating sensitive issues with your new boss. This will almost always impact the relationship around tough issues. Beyond that, you will almost always leave some money on the table — even if you’ve already agreed on price. I made more money as a % of the deal when I had a banker, with less drama after the deal. They get you better deals on retention, escrows, hold backs, stay bonuses, etc. Sometimes, it’s hard to ask for all of this on your own. But a banker can. More here: If Continue reading "Is it better to sell a startup with an investment banker or directly via the founders (value below $20M)?"

Most Read in 2017: Hiring Sales, Sales Comp Plans, and more

We’ve almost made it alllll the way through 2017! (phew!) Give yourself and your team a pat on the back for conquering 2017 – and for all the exciting plans ahead in 2018. As we look back, we’re celebrating by recapping our top read posts of 2017, and you’ll notice a trend. The SaaStr community loved our posts, old and new, on a particular topic: sales, which comes as zero surprise to us. It’s not too late to catch up on all the posts, and get ready to hire your sales team in 2018! #1 – A Basic Structure for a VP, Sales Comp Plan: 50/50/25+  For sales, incentives are critical, and the VP Sales will likely be the seemingly most expensive hire you ever make.  That’s stressful.  Jason tells you what he did and what he learned from it. #2 – An Initial Sales Rep Comp Plan to Lower Continue reading "Most Read in 2017: Hiring Sales, Sales Comp Plans, and more"

What Are The Best Customer Success KPIs?

As you can probably imagine, I’m asked all the time what the best Customer Success KPIs are. What metrics should you use to know if your Customer Success initiative is working. Here’s the deal. I’m not an analyst… I’m a consultant. Companies hire me to help them rapidly acquire good-fit customers, keep those customers longer, get them to buy more over that extended lifetime, and get those customers to advocate for them, too. That’s called Customer Success-driven Growth. The reality is, though, that every company is at a different stage as a company, with their Customer Success initiative, etc. so wha the “best” metric for one company at one point may not be the best metric for another company (or even the same company) at a different time. Let’s dig into this, but first I have to address something serious…

Customer Success is NOT a Metric

Recently I saw an
Continue reading "What Are The Best Customer Success KPIs?"