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Sales Performance Management in the Subscription Economy
Sales Performance Management in the Subscription Economy
Sales Performance
Management in the
Subscription Economy
The subscription economy is changing the way we do business.
As businesses transition from start-up to growth to maturity,
different departments become a part of the equation and the
tools that were used in the old economy no longer work for
the high-growth nature of these businesses. As the criteria of
success evolves, the tools designed for the old transactional
economy can no longer help industry-leading companies achieve
results in the subscription economy. Our customers have
identied how their Sales Performance Management solution
aligns their sales initiatives at every stage of their business.
Sales Performance Management in the Subscription Economy
Start-Up
In the start-up phase, companies aggressively recruit customers
with the expectation of having a long-term relationship with them
and consciously decide to put short-term protability rmly in the
back-seat. New businesses want recognizable or market-leading
clients to show that there is a strong demand for what they sell.
From the operational perspective, during the acquisition phase,
companies invest their incentive dollars into “hunters” - sales
people who sign up more new customers, with longer contract
durations. They also want to maximize annual contract value
(ACV) to show investors that the product or service ts market
need and that there is money to be made. The metrics that play
the most important role in this stage that affect the design of
compensation plans are the number of new customers, average
contract value and the number of multiyear contracts.
Incentive
Compensation
Management (ICM)
In this stage, our customers are focused on acquiring new customers to grow their business.
The primary focus of their incentive compensation spend will be on incentivizing sales and marketing
teams to increase leads and acquire new logos.
Start-up businesses leverage their ICM solution to:
Measure & report on the engagement model across multiple teams.
Design commission, bonus and MBO plans based on nancial metrics, such as annual contract
value (ACV) and monthly recurring revenue (MRR) and non-nancial metrics, such as the qualied
lead velocity rate (LVR).
Tie an individual’s compensation performance to results on a monthly, weekly or daily basis,
which puts you in a great position for coaching to drive even greater results.
Expense and
Protability
Management (EPM)
Although most investors don’t expect prot in the early stages, they are looking for key indicators of
future success and the ability to measure those indicators across the entire company.
Start-up businesses leverage their EPM solution to:
Obtain instant access to the data required to calculate costs associated with sales engagement.
Analyze protability based on individual, product line or service. This gives the leadership team
better control of the incentive levers that will drive the business.
Create logical models to better understand how their go-to-market is truly performing and give
the leadership the ability to drill into the right level of detail to make adjustments accordingly.
Sales and Revenue
Management (SRM)
Start-up businesses need to maintain a laser focus on new business acquisition, targeting the choicest
subset of their prospect universe--despite the strong temptation to chase everything and anything.
Start-up businesses leverage their SRM solution to:
Automate, or execute on demand, calculations for individual models or all models.
Dene complex sales prediction rules against any data set, such as customer proles
and interactions.
Align your sales team and their compensation to your customer engagement model to ensure the
start-up investments are not lost due to inefciencies across the broader team
Sales Performance Management in the Subscription Economy
For start-ups, the game is simple: hone in on the lowest-hanging fruit in your target market, and
don’t bite off more than you can chew. Using a shotgun approach to sales is a denite temptation;
entrepreneurs generally start businesses because they see a huge market opportunity. Picking a
focused sector of the market may seem counter-intuitive, but it’s a discipline whose reward is traction.
TQM gives you the ability to align, collaborate and measure the success of your go-to-market strategy
across marketing, business development, sales and ultimately the entire company.
Start-up businesses leverage their TQM solution to:
Increase ability to align market opportunities to territory for all members of the go-to-market team
(marketing, business development, sales, technical sales, etc.).
Alert you to the need to change/shift models based on success, growth and the addition of
new resources.
Gain the ability to model territories and create coverage models based on new information gained
every month/quarter. This is especially critical during periods of high growth.
Manage the growth and changes across all your teams in a seamless manner without resorting
back to “experts”
Territory and Quota
Management (TQM)
In this stage, virtually everyone in the organization is a salesperson, so the name of the game is
aligning top resources with the best opportunities. As organizations grow in this phase, they will want
to determine how long they want their sales team that closed the new logo to stay engaged with the
client and what incentives and measurement they will put in place to drive the results that the business
needs to continue growing.
Start-up businesses leverage their WCM solution to:
Predict sales team member success based on statistical models which include any number of
variables, such as demographic and market data.
Creates a collaborative set of information, tying it directly to the incentive portion of each
individual’s income.
Workforce and
Capacity
Management (WCM)
Sales Performance Management in the Subscription Economy
Growth
Once a core base of clients is established, the company’s
focus begins to shift towards retaining and expanding those
clients in a meaningful way. The measurement of success
now includes core items like customer utilization, enablement,
and add-on products. This typically requires organizations
to begin looking for way to drive these results and usually
begins the move towards Account Management (vs hunters)
and the introduction of Customer Success teams. These new
teams add to the complexity of how an organization measures
success and how you use your compensation dollars to drive
the behaviour that is good for your business overall. This is
one of the places where old economy sales performance
management tools just can’t keep up. Those tools were
designed to pay commission on product sales and when you
add these new metrics and new back-end systems (think ERP’s
for professional services, customer success, etc.), they just
fail! As a leader, it is imperative to have visibility to be able to
effectively manage the entire engagement with the customer.
Especially those that operate on a subscription basis and renew contracts regularly need to share
incentive compensation between “hunters” and “farmers” - sales executives and account managers.
The emphasis on compensation hinges on retention. Though multi-year deals and cash up front are
still important to cash ow, businesses need to keep the support team accountable so that customers
remain happy and loyal.
Growing businesses leverage their ICM solution to:
Incorporate territory, payee and period specic quotas and targets into plans.
Create robust reporting and analysis for business users.
Incentive
Compensation
Management (ICM)
Most companies in the growth stage have established some traction in the market and need to ensure
they maximize renewals to really start ramping up their recurring revenue metrics – which is where the
real value is generated in a subscription-based business.
At this stage, they inevitably discover the importance of protability management either because
investors start focusing on the organization’s ability to achieve both their CAC and LTV objectives with
their go-to-market model.
Growing businesses leverage their EPM solution to:
Dene any number key performance indicators, such as lifetime value of a customer (LTV),
average revenue per account (ARPA), LTV to CAC ratio and months to recover CAC.
Model protability actuals, plans and forecasts based on any number of business segments, such
as sales order, sales team, territory, product, customer and channel.
Expense and
Protability
Management (EPM)
Sales Performance Management in the Subscription Economy
Growth businesses need to focus on retention, retention and retention. If you can’t keep existing
customers, the initial investment is quickly lost.
Growing businesses leverage their SRM solution to:
Model sales actuals, plans and forecasts based on any number of business hierarchies
and across any number of metrics, such as annual contract value (ACV) and total contract
value (TCV).
Segment revenue actuals, plans and forecasts based on any number of revenue streams, such as
existing monthly recurring revenue (MRR), new MRR, and net MRR churn.
Directly tie your compensation dollars to your core business metrics to deliver maximum results
across both the acquisition and retention of your customers.
Sales and Revenue
Management (SRM)
In this stage, businesses’ need to start implementing a hunter / farmer model to properly manage their
existing accounts, sharing quota with sales managers and other support staff who work alongside the
direct sales team.
Your ability to model the numerous options in a meaningful manner will help you gain the buy-in and
velocity you will need to manage this shift effectively across the entire company.
Growing businesses leverage their TQM solution to:
Derive quotas based on both top-down methodologies for new account hunters and bottom-up
methodologies for existing account farmers.
Ability to model not just the territory/coverage assignments, but directly tie that to how you want
to use your compensation dollar across twice as many teams.
Logically group territory denitions based on position, role or account type, such as new or
existing accounts.
Territory and Quota
Management (TQM)
In this stage, businesses need to start thinking about using tools that will provide a good level of
content-rich customer information and unsolicited support. It’s a strategy that enables a smaller
number of sales support personnel to handle a larger number of customers.
Growing businesses leverage their WCM solution to:
Understand and model the capabilities of the sales team and predict the capacity they will
have to (1) pursue your target market and (2) retain & grow your existing customers in a
meaningful manner.
Help determine the core objectives for each role/team and dynamically calculate total
compensation costs based on business unit or individual employee-level driver assumptions.
Include headcount, compensation, productivity and capacity data into forms, reports
and dashboards.
Workforce and
Capacity
Management (WCM)
Sales Performance Management in the Subscription Economy
Maturity
As businesses move through the start-up phase into
growth/retention and ultimately achieves, their sales
performance protability strategies must evolve.
Now that you know your customers are using your
product, we typically see companies add “farmers”,
sales professionals who can cultivate relationships with
existing customers and identify upsell opportunities.
Typically these upsell opportunities are closely aligned
to how your clients are utilizing existing services and
directly ties into the tools and systems that you will
be using for technical support, customer success
and even your own products. All of this additional
knowledge makes you signicantly more effective in
growing your relationship with your customer and will
result in adding new users, selling more add-ons and
modules and potentially expanding into new locations
with the customer. In this stage, metrics such as annual
recurring revenue (ARR) growth rate, sales volumes to
existing accounts and collections (ensuring all accounts
are paid and cash ow is good) dene your success.
Incentive
Compensation
Management (ICM)
As your business grows, the need increases to compensate more people for more things. Territories
expand, but it’s no longer just outside sales that need to share the benets. Product specialists need
nancial acknowledgement for their part in educating prospects and new clients. For marketing,
compensation can be tied to annual contract value (ACV) or annual recurring revenue (ARR). As
revenue streams and compensation gain in complexity, companies can do well to introduce managers
by region or even to introduce a Chief Revenue Ofcer.
Maturing business leverage their ICM solution to:
Conduct what-if calculations based on forecast and pipeline data.
Draw data from multiple sources to include all of the information required to compensate for each
department or function.
As the company continues to scale and potentially transition through an IPO, they really need to focus
on the monetization strategy for every customer - which is commonly referred to as maximizing the
lifetime value of their customers.
Maturing businesses leverage their EPM solution to:
Conduct what-if calculations based on any number of protability congurations.
Include drivers, business segment and summary revenue and expense data into forms, reports
and dashboards.
Analyze the potential impact of new services or new product offerings to the existing model on
longer term metrics like Retention, LTV and CAC.
Align the sales and marketing resources in a manner to achieve these key metrics that drives the
value for the business overall.
Expense and
Protability
Management (EPM)
Sales Performance Management in the Subscription Economy
Maturing businesses should implement tools like statistical analysis to optimize the mix, now that
establishing territories and quotas has become far more complex with different geographies, more
accounts, an extended product mix and a growing network of partnerships. Assuming that a company
has historical sales data for a given territory, sales management can conduct statistical analysis on
additional methods of calculating true potential. Several methods like this one can form an index useful
for quota allocation and allow you as a leader to begin to truly understand your sales capacity and build
a team that predictably delivers the results expected on both the top and bottom line.
Maturing businesses leverage their SRM solution to:
Leverage a library of pre-built sales and revenue-related forms, reports and dashboards, including
scenario analysis, sales to revenue waterfall, pipeline change and prediction result reports.
Roll forward and optimize prediction models from period to period.
Conduct what-if calculations based on any number of sales and revenue congurations.
Territory and Quota
Management (TQM)
Maturing businesses have the historical data required to project productivity fairly accurately. They
have been through some growth spikes and found ways to cope with added capacity. The next step
in capacity planning is to cluster by geography, sales representatives’ skills, aptitudes and vendor
relationships.
Maturing businesses leverage their WCM solution to:
Manage the impact of all employee events, such as onboarding, transfers, merit increases,
promotions, leaves, terminations and retirements.
Ensure all changes to employee hierarchies and attributes are time effective.
Sales and Revenue
Management (SRM)
Maturing businesses must optimize their land-and-expand strategies to maximize the lifetime value
of their customers. The keys to driving new revenue streams and creating the right level of visibility lie
in their principal areas of growth and how services are being used. Part of your critical success at this
stage goes beyond the sales team to also include customer support and customer success.
Maturing businesses leverage their SRM solution to:
Leverage a library of pre-built sales and revenue-related forms, reports and dashboards, including
scenario analysis, sales to revenue waterfall, pipeline change and prediction result reports.
Roll forward and optimize prediction models from period to period.
Conduct what-if calculations based on any number of sales and revenue congurations.
Workforce and
Capacity
Management (WCM)
Sales Performance Management in the Subscription Economy
The metrics of success for a subscription business move
beyond traditional ERP and CRM solutions. In order to get the
whole picture, subscription businesses need the ability to access
multiple data sources such as project management, billing, and
customer success tools to determine the health and success of
their business across the many departments that are involved
in the sales cycle. Industry-leading SaaS companies leverage
their sales performance management solution to access all of
these necessary components to help them understand, analyze
and execute the best sales strategies to grow their business.
Learn more about how
a Obero can take your
growing subscription
business to the next level
Book a Demo
Sales Performance Management in the Subscription Economy
LO C AT E
400 Applewood Crescent, Suite 110
Vaughan, Ontario, L4K 0C3 Canada
CONTAC T
Phone: +1 888 815 2996
info@oberospm.com
www.oberospm.com
About Obero
Obero is the developer and provider of Obero SPM, a cloud-based Sales
Performance Management solution which supports the entire end-to-end
sales life cycle. Obero SPM integrates Sales Planning and Forecasting,
Incentive Compensation Management and Sales Protability Management
processes in a single unied application that is uniquely positioned for the
subscription economy.