This post is by Jason Lemkin
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It’s simplest probably to tie the commission payments to the quotas. If reps have monthly quotas, pay them monthly. If they have quarterly quotas, pay them quarterly.
At the end of the day, most SaaS start-ups:
- start off paying monthly, but sometimes / often only once cash is actually received; and
- move to quarterly once they are at scale.
Later, once you have 20–2000 sales reps, a Sales Ops department, good modeling software, etc. … you’ll end up likely with both a fair amount of complexity in sales commissions and likely quarterly quotas. That makes quarterly the only practical option.
But in the early days, you want to incent reps to put points on the board fast. And you want them to feel like they can do it. So paying reps monthly, as close to real-time as possible, helps them believe and get paid. It also is a fair
for forcing them to hit monthly quotas, not just quarterly ones.
More on that here: Your Quickest Way to Grow Faster: Move from Quarterly to Monthly Quotas. Today. Now. | SaaStr
In terms of to pay after signed contact or not until after collections, when cash is tight, the former can make sense. Later, it just adds to the stress for sales reps and doesn’t help you all that much with cash management. So pay upon e-signing once cash doesn’t matter as much. But maybe pay upon receipt of payment when it does.
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