Questions

How much do I need to pay in Boston for a Saas salesperson? Interested in breakdown between salary and commission.Software sells for $50 month..

3answers

Boston is an expensive city to live in. Rent alone is going to be $2000+. So figure $3000 for your salesperson.

That's 60 sales a month just to pay that person. Two sales a day just to break even on their cost--forget about you, and your overhead.

Of course, your salesperson doesn't have to be local. But it sure helps--managing them, making certain they're actually doing the behaviors they need to be doing (making calls, etc.), helping them with the technical stuff.

I don't see this being financially viable under such a model.

An automated online funnel is probably a better idea, unless you raise your price to pay for the salesperson and additional overhead.


Answered 6 years ago

Most people will tell you that you need a higher price per month in order to support a salesperson. That's what everybody in the startup space says. This post talks about that in more detail: http://blog.asmartbear.com/pricing-business-model.html.


Answered 6 years ago

The first thing to determine here is what is a customer worth to you? In other words, what's the net present value (sometimes referred to as "lifetime value") of a customer?

Roughly, the calculation is: (MRPU - MCPU) * AMOS

That's (monthly revenue per user - monthly costs per user) * the average number of months a user remains active. If you're too new of a service to know how long the average customer will stay, then start by using the average for your industry or a related one. If you can't find it published online, you can find it out by buying a few beers at the next industry gathering.

For example, that might be something like: ($50 - $3) * 15 = $705. Personally, I also like to discount this figure for time value of money, since that money is coming to us over time. So, let's say the net present value (NPV) of a customer in this example is $670.

This is hugely significant when it comes to making determinations about your maximum allowable costs to acquire a user. In other words, how can you know what you can afford to pay for a user, until you know what they are worth to you in economic terms?

Now that you know you're making about $670, on average, for every new customer you sign up, you can apply this knowledge to salesperson compensation. The pay in Boston is largely going to be dependent on your competitive pay. Ballpark, I'd say you'll want to be at $80-100K+ in total compensation to attract someone good, but you can scan services like Indeed.com to get more intel for your area. In my opinion, the best salespeople are the ones who are highly motivated by commissions, so I'd personally want to find someone who would work for about a $60k base, but could make $200k+ if they hit their numbers. In the above case, where you're customer LTV is $670, you know you can offer something juicy, say $250/user as a commission. So, with a $60k base, they're paying for themselves at 240 users/year, and then another 560 users a year gets them to $200k. Find the numbers that work for you, but knowing your LTV as context is critical.

As a bonus, if you're in the market for capital, this will impress the pants off of prospective investors, since most entrepreneurs can not convey this level of understanding about their economic engine.

I'm available for a call if you want additional insights on this along with strategies for rounding up all the best salespeople in your field.


Answered 6 years ago

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