Whether it's managed services or cloud services, technology companies need to adopt new sales compensation and commission plans that reflect monthly recurring revenues (MRR). Many MSPs completed the MRR transition as much as a decade ago. But thousands of VARs are just getting started on the journey.
So what are the first steps? I've seen a lot of MSP and cloud compensation plans. Many are complex, with all sorts of tiered perks and qualifiers. For VARs just beginning the journey I recommend keeping things extremely simple.
A prime example comes from Intronis MSP Solutions by Barracuda.
Example MSP, Cloud Sales Compensation Plans
According to the data protection specialist, there are three standard approaches to compensation plans that work well with recurring revenue deals:
MSP, Cloud Sales: Sunset Clauses
Much like an insurance agent, a sales professional in the MSP or cloud market can build a "book of business" that potentially generates recurring revenues for years or even decades to come.
Should the sales pro earn commissions on that recurring revenue -- forever? That scenario could lead to sales laziness. To combat that scenario, many MSPs use so-called sunset clauses -- tiered commission rates that fade away over a four-quarter cycle. Each new customer win earns a high commission, while customer engagements that are three- and four-quarters old gradually fade to zero commission rates.
Still, many pundits say the sunset clauses should never fade a commission to zero. By earning at least a small commission indefinitely, the salesperson is more motivated to stay in touch with the customer over the long haul -- potentially ensuring higher customer retention rates.
What's Your MSP, Cloud Compensation Plan?
So how do you compensate your sales team -- and how is the strategy working so far? Participate in ChannelE2E's latest quarterly research on Sales and Compensation Plans. Your information will remain confidential. We'll share overall market trends during our September 2016 webcast.
