Page 82 - The Sales Acceleration Formula: Using Data, Technology, and Inbound Selling to go from $0 to $100 Million - PDFDrive.com

expectations with their customers. The salespeople who ranked best on the
customer churn list were no longer the best expectation setters. Instead, they had
good luck. A change in the sales compensation plan was necessary.

I needed to keep customer churn in check. I also needed the salespeople to be
able to control their own destiny. I asked myself, “What criterion is 100 percent
in the control of the salesperson and highly correlated with customer success?”

For the HubSpot business at the time, the answer was advanced payment terms
for new customers. Our customers who paid month-to-month were less
committed to the overall HubSpot service and were far more likely to churn.
Those who prepaid annually were more committed to the service and were
ultimately more successful.

As a result, Plan 3 was designed as follows:

1. Salespeople would earn $2 per $1 of monthly recurring revenue

2. The commission would be paid out as follows:

a. 50 percent on the first month's payment

b. 25 percent on the sixth month's payment

c. 25 percent on the twelfth month's payment

Under this plan, if a customer signed up paying month-to-month, the salesperson
would need to wait an entire year to earn the full commission from that
customer. If the customer signed up paying a year in advance, the salesperson
would earn the entire commission immediately. The plan was well aligned with
how far in advance the customer paid. How far in advance a customer paid was
correlated with high customer success and completely in control of the
salesperson.

Before rolling out this plan, the average prepayment commitment was 2.5
months. When I rolled out this plan, that average jumped to seven months.
Customer churn remained in check; in fact it improved. Customers were
profitable to HubSpot. Salespeople felt like they were in control of their destiny.
Mission accomplished.

“There is no perfect sales compensation plan. The appropriate sales
compensation plan depends on the stage of the business.”

Am I recommending the same evolution of compensation plans for your