Aligning Finance and SalesOps – Best Practices & Tips for SaaS Companies

Aligning Finance and SalesOps – Best Practices & Tips for SaaS Companies  

Alignment between Finance and Sales, especially SalesOps, is critical for SaaS companies to effectively manage growth and expenses.  Miscalculating quotas, attainment and On-target Earnings (OTE) for account executives can drive up CAC, not to mention impact revenues and forecasts. Lauren Kelley and Eric Stephenson, Director of FP&A at Domo discussed in SaaS Conversations this week best practices for aligning Finance and Sales, and some of the key Sales metrics and practices at Domo.  Eric has been in Finance from an early stage thru Domo’s recent IPO.

Some key points from the discussion:

Alignment between Finance and SalesOps:  best achieved by building a relationship before the budgeting and planning process begins.  Follow a regular cadence of meeting with Sales to build the relationship and learn how Finance can support them.

  • Alignment starts at the top between CFO and CRO
  • SalesOps reports up to CRO, Finance up to CFO
  • Eric meets monthly with Sales leaders one-on-one throughout the year
  • Eric uses OPEXEngine Sales benchmarks for the planning process as well as throughout the year for aligning with Sales leadership on targets for CAC, Quotas, OTE multiples, retention, headcount and expenses
  • DealDesk sits in Sales

Commissions

  • Paid monthly
  • Pay on 100% contract value
  • Account reps paid a small amount on renewals as well to keep them in the customer
  • Sales commission amounts managed by SalesOps but overseen by commission analyst in Accounting

Systems

  • Domo uses SalesForce for CRM,
  • Workday/AdaptiveInsights for budgeting and planning,
  • OPEXEngine for benchmarking, and
  • Domo for management reporting and dashboards
  • Finance is the one source of truth for the metrics, like CAC

If you would like to watch the webinar on demand or download the slides, please do so, and let us know if you have any questions.

Lauren Kelley:               We are now live and we’re going to give this another minute or two for more folks to join us. But, welcome everyone. I’m Lauren Kelley from OPEXengine and I’ve got Eric Stephenson here from Domo. Hi Eric.

Eric Stephenson:           Hey, how you doing?

Lauren Kelley:               Good. How are things in Salt Lake? Is all the snow melted off the ground yet?

Eric Stephenson:           We’re slowly getting there. We have weird weather in Salt Lake, so it’s kind of up and down. We’ve had some good days and the last couple weeks was really sunny and warm and then it’s snow the next day. So, been good for the skiers. I’m not much of a skier, I’m an east coast guy, so I don’t do a lot of skiing, but it’s been a good winter I think for the skiers, but hopefully we’re coming into the spring and can kind of get out of this winter.

Lauren Kelley:               We’ve had the same thing in Boston. Strange, strange weather changes 50 degrees in one day sometimes. Well, we’re going to get started here. I’ll do a little bit of housekeeping. Thanks everybody for joining us this afternoon or this morning, depending on where you are. For everyone participating their phones should be on mute. Do you have any problems with your computer? Sometimes it helps to dial in on a land line. This is an interactive Webinar. You’ve got a great community of finance folks usually in the group, on the webinars. So please send in questions in chat. We’ll answer as many as we can and then any questions you have that we don’t get to, after the Webinar we’ll be happy to continue the discussion on our SaaS QandA site on the OPEXEngine website. So with that let me introduce myself and I’m so excited to have our special guest here, Eric Stephenson, head of FP&A for Domo.

Lauren Kelley:               I’m Lauren Kelley, CEO and founder of OPEXEngine, the SaaS benchmarking platform and finance community. We work with hundreds of software and SaaS companies, almost all SaaS, to benchmark their performance and operating metrics, including Domo and a number of other companies. Going from early stage all the way up to enterprise stage. , we help support the budgeting and planning process, but also the every-day data driven decisions and working between finance and different parts of the company. And that’s what we’re going to talk about today. How finance works with the sales organization, particularly with sales ops. And OPEXEngine has been doing this for 12 years now. We’ve worked with hundreds and hundreds of a SaaS companies. So with that, I’m going to ask Eric to introduce himself and if anyone’s having trouble hearing or having any problems, please send a note in chat. So Eric, thanks for being here today. Can you tell us about yourself?

Eric Stephenson:           Thanks for having me. A little bit about myself. I’m currently the Director of FP&A at Domo. I’ve been at Domo coming up on four and a half years. When I joined Domo, we were still relatively small about four and a half years ago. You know, we were about probably around 20 million in revenue or so at the time when I joined. And then I’ve been here coming up on four and a half years, we have seen, seen some good growth and I’m able to be a part of our IPO just over the summer. So we’ve been publicly traded now for three quarters and so far so good. But before that I’ve worked at work in FP&A at Ancestry right before Domo and also worked at at Xerox and the Tyco Electronics. So that’s kind of my experience, mainly done FP&A most of my career. And I would say most of the most of my SaaS experiences comes at Domo and been a good ride so far. So it’s a good space to be in.

Lauren Kelley:               Excellent. It’s a great company and definitely on a good growth path. Tell me a little bit about how finance and what resources you have in Finance and particularly any resources focused on sales and how sales ops is organized at Domo.

Eric Stephenson:           Our sales op is relatively lean. I think that’s probably typical maybe for our size. But our sales ops organization, I think we’re about 10, something like 10 employees. And then our FP&A team probably typical for most FP&A teams. But we have an analyst assigned to sales. I’m kind of responsible for the sales and marketing side and, so I work pretty close with sales ops as well as all the top line stuff.  Our sales ops report up through the CRO. And then of course we report up through to the CFO on the FP&A side. But there’s certainly a ton of alignment there. I feel like our CFO and CRO are pretty well aligned. So, I think we’re well in sync even though we have a different reporting structure.

Lauren Kelley:               This question came up quite a bit in our last SaaS finance meetups in the Bay Area and in Boston in December. Do you have a deal desk function and does that sit in finance or is that part of sales ops?

Eric Stephenson:           It’s interesting that you bring that up. So we’re actually in the process of doing that right now. We kind of talked about for some time because a lot of that burden has been on accounting really it’s really on the sales side. And then, you know, some of legal kind of helps with that. And then the accounting side is doing a lot of really trying to make sure deals are structured correctly, make sure we don’t have problems with the contracts. And that’s been a hot topic the last couple of years and we’re in the process of putting the deal desk in place right now actually. But the way it’s going to be, and I know there’s a lot of debate on this topic, and I think you could go probably go either way, but it’s going to fit in sales ops for us.

Eric Stephenson:           So I will report up to our VP of sales ops and kind of a dotted line I think in the finance, but essentially it will be a sales function. And I think there’s a lot of good things that come from that. I think you can kind of accomplish both. You know, the reason why you want to sit in finance is so that you have that control and you can make sure that from a finance perspective that things are structured correctly, but I think you can accomplish that as well. Sit in the sales and probably even then some, so that’s kind of why we went that route. But we can talk more to that. But that’s kind of where we’re at.

Lauren Kelley:               It’s interesting in what we found,just in this anecdotal experience of asking folks in the bay area at our SaaS finance meetup, most of them I think had deal desk in the finance organization.   In Boston, it was half and half, but maybe it speaks to your great relationship between sales and finance that it’s okay that it’s in a sales ops. I think we’re going to start talking about that. Well, folks are taking the poll. You know, what do you think’s the most important thing about building a great relationship and a productive relationship with sales ops?

Eric Stephenson:           I think I’ve kind of seen both. And I think especially as you go in, as you think about your planning especially for a SaaS business like ours, did you think about your planning, like some of the most important planning you’re doing is with your sales organization just because it affects your top line so much as well as your bottom line. I think it’s essential that you’re in sync with sales ops and they have such a big role in all that planning. And then of course the FP&A team has a big role in that as well. I’ve kind of seen where there’s been some disconnect there. And then I would say over the last several years here at Domo, I feel like we are in pretty good alignment with the sales ops. And so essentially, we’re working together almost as a team and putting together the planning commission plans, top line plans, quotas, targets, all that is really done together. And I think that’s key because then you don’t have two different organizations operating in silos where you end up there being a big disconnect and I think that it creates also some confusion as you’re marching towards targets during the year.

Lauren Kelley:               One of the key things I took away was just, it sounds like you make sure upfront you’re aligned and feel like you’re operating together instead of two silo organizations. So I’m just sharing the results of the poll. Obviously quick poll of folks on the line, there were over a hundred people registered. So it looks like just over 50% of the people say there is some misalignment and friction, but mostly okay, although it can be difficult to get the analysis right. About 35% said, you know, sales and finance have a great working relationship and collaborative and then about 11% said they feel like there’s a lot of friction and sales and finance are not aligned, which then leads to problems. It takes a lot longer and a lot more manual process to get things done.

Lauren Kelley:               So interesting. It continues to be an issue. I’m going to move ahead and talk a little bit more about how do you build trust? I think when we were doing the prep for this Webinar, you were talking about some of the things that you did in order to help build the relationship and improve the relationship. I think one of them that you mentioned was start building the relationship before you’re sort of hot and heavy in the budgeting and planning process. Make sure you have some trust built there. And maybe you can talk about some of the things you’ve done with, with sales to help them out.

Eric Stephenson:           I think there tends to be friction between sales and finance a lot of times and maybe not quite as much of a sales ops, but definitely sales. I think as a general rule, and this goes with any FP&A support role, I think they need to view you as their advocate and as a partner. And so if they always feel like the you’re coming in just to crack down on them that’s when you kind of get that friction and they just don’t include you on anything. And so I think from the very beginning, you have to create that relationship where they understand whoever the sales leader is and if we’re talking to sales ops where they understand that really that you’re their partner, that you’re working together to put things together.

Eric Stephenson:           And I think you do that by early on inserting yourself and helping with whatever it might be. So just an example here, we had a new ops VP about a year and a half ago or so, and I worked really well with the previous one, but when he started, I mean, we met up immediately just because we knew how important that relationship is. And we offered our assistance in doing various different things and figured out what projects they were working on and we kind of jumped in and supported where we could. And I think that that to me goes a long way of being able to show you can provide that support to them and they realize like, hey, maybe these guys actually, you know, care about helping us out. And it’s more of a partnership then them trying to control what we do. It’s tough. I think the other thing too is just even developing a good relationship, having a friendship and a good relationship with those individuals, whether it’s in a one on one.  I have one on ones with a lot of sales leaders in monthly or you know, we have quarterly reviews and some of it is just checking up on them, seeing how we can support them, how we can help them and ask them what they need.

Lauren Kelley:               So even just making sure you have the cadence of regular meetings, even if there’s not something specific to do helps build the relationship rather than just “I got to get this thing done, you got to help, you got to participate and do it my way.”

Eric Stephenson:           I think that’s right. And I think the reason why if you do, and I have one on ones with most of the sales leaders and it’s maybe it’s once a month but some of that you’re just having a one on one to connect in. A lot of times things will come up like, Hey, I’ve been thinking about this or I need help doing this or maybe you guys can help with this. And so it gives you an opportunity then for things that come up to say like, share. Our team can take that or let me look at that and I’ll get back to you and then you can actually help them and it’s not you cracking down on them or just working with them. But it has to do with looking at commissions or you know, Q3 budgets or something like that.

Lauren Kelley:               I think that’s great because a lot of the mistrust comes from just feeling, I mean the old traditional way of doing things. Finance was sort of the police person cracking down on sales. And some people have the attitude, salespeople are all wild cowboys who will do anything and don’t care about the company. They just care about their own monetary gain. And then the salespeople feel like finance, you know, are all a bunch of bean counters and they don’t really understand how really hard it is to get a sale. And the pressure of having monthly or quarterly or annual quotas and you know, your whole life depends on that. And why is somebody putting all these restrictions on me? A lot of that’s just perceptual and cultural. And I think in the SaaS world, you just can’t have that. You got to build the relationship. But that comes from each side understanding the other’s discipline.

Lauren Kelley:               Before we get into some of the specifics of quotas and comp plans and all the nitty gritty of planning the bottoms up kind of things that you have to plan between sales and finance. Let’s talk a little bit about how you set the high level targets in terms of what are the numbers that you’re shooting for and especially you have the experience of going from a private company to a public company. It’d be interesting to see how that changed and how you have to think about even at a granular level how that’s going to affect the guidance you’ve given the street. Can you talk a little bit about the tops down thoughts about, or how the plan gets developed?

Eric Stephenson:           So typically, I would say maybe it’s like four or five months before year end. We all connect with our sales ops leader and we’ll kind of at least start socializing a little bit the plan. We kind of start talking about things that we want to focus on for the coming year. Things that maybe went well or didn’t go well, areas where we’re struggling or themes that we need to change. So we’ll start socializing that, but we don’t really have targets yet, so you can’t really like totally dig into it. And then usually it seems like a couple months before you’re in and what we’ll start building that to the best that we can. And then usually a couple of months before a year and then we get those at least initial targets, which is typically, at least the way we’ve done it, it’s been top down where CFO, CEO in conjunction with other sales leaders and finance leaders are looking at the next year and figuring out, hey, what do we need our top line targets to be?

Eric Stephenson:           And what’s reasonable. Even looking at it from a quarterly perspective. And then we get those and then after, once we had those, then we can really kind of start formulating and building the plan. We have most of it kind of built out. So it’s like once we have the targets, then we know what we have to drive to. Then a lot of it is kind of playing around with the numbers in reviewing with sales and figuring out what’s reasonable, what’s attainable and how do we get there and how much we need to hire and those kinds of things. That is typically our process and once we get the targets then it’s like sales ops and myself are meeting and I feel like every day for like months, just going through the plan and seeing where we’re at and what we need to change.

Lauren Kelley:               How long would you say that often takes?

Eric Stephenson:           Well, this year I think I think we kind of kicked it off in October. Our fiscal year ends January 31. We kind of kicked it off in Octoberish maybe. And so we started having some meetings and doing kind of what I was saying where we were talking about challenges and things that we knew that we need to focus on some areas where we had struggles. And so we already kind of had some idea and then also just talking about metrics and things that we were going to use to drive our plan. And then once we got the top down numbers and we get kind of run with it. And so I think it was probably in October we kicked it off and I felt like we were pretty well done in January, but definitely takes several months between putting it together, iterating and then getting those approvals and going back and forth.

Lauren Kelley:               So from a top level, what are the key metrics that are defined and, and that you have to have to make everything else roll up into: is it the revenue target, growth rate, what else are the key metrics that you focus on?

Eric Stephenson:           I would say the top line targets, at least for us where we’re at as a company, I think this is what we’re really driving to is growth. And so some of it was definitely growth rates and this year was like, hey, even myself kind of got tasked with-  this is kind of the growth rate we need to be at and  revenue from a revenue it was well ACV perspective. And so I was kind of tasked with that. And then from there kind of figured out, hey, okay, so how would we get that growth rate? What’s reasonable, what can the teams do, since we have teams based in Europe and Japan and Australia and here in the United States.  Then I figured out what’s reasonable and attainable based on current work or current salesforce and what we’ve done historically. So I kind of put that together based on those growth rates and then iterate it a little bit with CFO. And then once we did that, then we have the targets and said, hey, okay, here’s our numbers, now let’s figure out how we get there.

Lauren Kelley:               And then what do you think are the key sales ops metrics that really drive towards those performance numbers?

Eric Stephenson:           The big things we look at, and honestly over the last couple of years, I think one of the bigger metrics that we’ve looked at is productivity per rep, ACV per rep. Just because, and we’ve looked at a payment of course in the past, or we’ll look at capacity and say, you know, obviously if we give this cost quota at the street, we have this much capacity, what kind of a team it can be as, and that works too. But I think ACV per rep, productivity per rep is almost a better indicator or it has been for us because that really tells you, you can look at history and say, what kind of ACV have our reps been producing on an annual basis? And so from that we can get a pretty good idea of what we could get in the future, you know, with some sort of improvement.

Eric Stephenson:           And so we use that a lot of, when I’m driving to I’ll kind of look at our productivity per rep and say, Hey, what’s reasonable compared to prior year? I’ll sit down with sales ops and say, hey, to get to this growth, this kind of productivity, I’m assessing at each level. Is that reasonable? Can we get that? And that’s kind of how we iterate a little on that. And then in addition, we do certainly look at quota or capacity, you know how much quota were assigned to the street, how much coverage of these leaders will have and whether that’s reasonable as well. But a lot of what we’ve been driving to has been the productivity.

Lauren Kelley:               And when you say ACV per rep, you’re talking about ARR per rep or are you talking about the average contract value per rep. So it’s what they book in new revenue.

Eric Stephenson:           So essentially new bookings for the year and we’ll look at the recurring side as well. Even just total for the services included as well. But yeah, exactly. So new bookings per rep.

Lauren Kelley:               And when we were talking before you said that the benchmark, you use benchmarks and benchmarks help give you a guide rail of where you think that you should be within plus going back and forth between your own historical data.  Then comparing yourself to what others have done.

Eric Stephenson:           So, and I would say kind of the first step is putting together that plan, using productivity, using the payment. Benchmarks are something of a guide as well, the benchmarks and some of these benchmarks, you know, we’re not at yet, we’re working towards and so it’s kind of more we’re trying to make progress in some areas. And so we certainly, and I think that that’s helpful with sales as well because a lot of the, a lot of the stuff that we do, we’re always using the benchmarks. So we’ll say, hey, this is kind of a industry standard or this is what we should be driving to. And so I think that that creates alignment as well as with sales, whereas it’s not just me and FP&A saying, Hey, I know we need to get to this number, but it’s, this is what our peers are doing in the SaaS world.

Eric Stephenson:           And so we used that as well. So once we build the plan, then I’m saying like all these I’ll look at, so kind of a subset of CAC, I’ll even look at sales acquisition costs we’re just looking at sales and saying, okay, that’s great and we can hit our number, but we’re hiring so many people that it’s actually our acquisition costs. You’re crazy. And so that doesn’t actually make a lot of sense. And so we will drive to that, to sales acquisition cost or CAC will kind of plug all that in and say, does this plan make sense when we look at the metrics? And even if we’re not at the benchmark yet, are we progressing? Are we doing better than we were, you know, last year? And that’s kind of what helps us. I would say kind of a sanity check, our plan to make sure it actually makes sense and it’s going to be profitable at some point in the future.

Lauren Kelley:               It’s definitely a value that a lot of finance people find with benchmarking benchmarks that are credible from other SaaS companies. Cause it just takes it out of the personal.  Instead of “I’m telling you, you’re not doing well enough for, it needs to be better”, the benchmarks make it a data driven discussion. You’re never going to be on the mark in terms of the benchmark on every single metric. So it’s just as important to know where you’re a little bit weak or need to work on it a little bit more.

Eric Stephenson:           And while we’re on the benchmark topic,  for those of you that are not familiar with our product, our product is a platform.

Eric Stephenson:           It enables you to kind of create dashboards. I mean a ton of different things. But we’ll take that data, that benchmark data like we get from OPEXEngine and we put that into our own product to where we’re able to share that. Like our CRO has a specific dashboard that he looks at it, it will show him where all his metrics are compared to benchmarks. So I think that helps create the alignment and actually kind of creates even more urgency for him when we meet where he’s like, he’s looking at it and saying, we need to be better here. We need to improve. So how do we, how do we get closer to these benchmarks by year end or by next year or whatever it is.

Lauren Kelley:               You guys have done a great job. You know, as a company you have an experienced management team experienced in using data, which probably has allowed them to make investments that might’ve felt a little too risky for some other companies that don’t have the data to back it up. It’s interesting thinking about how do you apply that to quotas and figuring out when pushing the sales organization, so many companies have different either manual processes and figuring out quotas or will anecdotally say, we’ll check with some companies, see what they’re putting out as quotas. I think you guys have a, a pretty strong process on setting quotas for each individual level. Do you want to talk about quotas a little bit?

Eric Stephenson:           What are the top, I think that’s always a hot topic is you have planning and you know that’s always tough to the course. Guys don’t want their quotas to increase a lot. But it impacts their commission quite a bit. But I think we use a bunch of different things when we’re looking at quarters and some of it is looking at historicals too. So it’s looking at at our enterprise team and say, Hey, this is what they’ve been doing the last couple of years. It’s not real reasonable to assign a higher quota even though we want to increase it 20%. It doesn’t make a ton of sense. So we’ll use historicals to look at what we’ve done. And then in addition to that, we’ve looked at benchmarks as well.

Eric Stephenson:           I mean there’s some stuff out there on multiples to your OTE, multiples to quota. So you can kind of use that a bit. Cause I think a big part of that too when you’re looking at quotas is does it make sense to what you’re paying these guys? And so if you’re going to, if you’re going to have a really low quota and they have a high OT, your CAC is going to be terrible and in the end your commission stack is going to be really high. So you have to look at that as well and look at their OTE’s and say, if we assign this quota, what’s our acquisition costs actually look like, what’s our commission stack going to look like? And so that kind of drives the conversation as well when we’re looking at it and saying, hey, we got to get our commission stack to this.

Eric Stephenson:           In order to do that, we can’t have quotas at this level because we have our OTE’s too high, at least compared to that quota. And a lot of it is working with the sales leaders to support as well, saying, we need to give me this number if we go with this quota, this is how much coverage you have on the street, what do you think is reasonable that maybe you could over assign? And so it’s kind of iterative. But I think that those are all the things that we factor in. And we just, you know, we just kind of went through that process and ultimately I, my team, myself and my team threw together a worksheet and sat down with the sales leaders and say, hey, here’s your target and this is what it looks like at these different quotas. You know, what can we do to get you some coverage, get you 10% or something covers that the street. And so it was more of a process with them as well that we just went through. And I felt like it worked well because it let their managers figure out, hey, I actually want to assign more just cause I want that coverage.

Lauren Kelley:               You’ve got to have the buy in from sales management that they can make the number cause they’re the ones who were going to be penalized or benefit from making the number.   That gets into the commission side of things because it’s a lot of different metrics come into setting the commission expense metrics. Also you want to incent people to produce the numbers, so it’s a fine balance between incenting them in a really great way, but at the same time not over incenting them so that it costs you more than you can afford in terms of CAC. Any best practices or  tips you have on doing that? Or just an example of some of the stuff you’ve run up against?

Eric Stephenson:           I think the commission is the top one, and I feel like over the last several years, you know, every year it’s kind of different. But in my opinion or my philosophy would be when it comes to commission plans to keep it simple because, sometimes it’s like you go into commission plans and it’s like, oh, we want more new logos, we want more than recurring business. Uh, we want more larger deals, we want that to do something else too, let’s add all these different facets of the plan to try to incent these things. And then what ends up happening is to almost distract your reps and you don’t actually get the top line like the ACV targets you are trying to hit. So for me, keep the plans relatively simple. You want to drive success, the goal of your commission plan is to drive to your ATV target.

Eric Stephenson:           You want all of your reps to hit their quota. And so your plan should drive to that. So they should have a plan that incents them to say, I just want to hit my quota. I don’t want to do some other weird thing. I can’t make my OTE unless I hit my quota. That’s what you want them to think, at least in my mind, and then I think that’s the core of your plan. And as well as I think you over, if they over perform, you make that commission plan, you know, really enticing that if you hit beyond 100%, you can make a ton of money. You might not make a lot of zero to 100. If you get beyond a hundred you can make a ton of money and that drives your guys to hit your, your reps to ultimately to hit your targets.

Eric Stephenson:           And then I would just say the second thing that should be your primary focus is the right quota to hit their target. And then maybe there’s one thing that really you focus on that year, like maybe you need more recurring business or you need more new logos or maybe it changes from quarter to quarter. And so you set aside some spiff money where  you create a spiff each quarter because you incent one other little thing on the side. But I don’t think you get more complicated than that, and I’ve seen it where we’ve done so many steps that you end up incenting bad behavior. And if you kind of over rotate on one thing, sometimes you end up incenting guys to do crazy stuff to get their OTE and you don’t actually get the actual ACV that you wanted.

Lauren Kelley:               Simplicity is incredibly important. I once was running a 300 person sales organization and we paid very expensive consultants to come in and put together a comp plan. It was a total mess and I couldn’t even figure out the comp plan and I was responsible for it, much less the reps being able to understand it. So here’s a question that came in from the audience, which is a great question and everyone always asks us. We’ve had a lot of discussions in the benchmarking community, and I apologize for the fire engine in the background. That’s part of the problem of being in the city. How are your sales reps measured and compensated? Is it on bookings or recognized revenue invoicing or cash in the door?

Eric Stephenson:           The way we do it is we pay 100% on ATV. So if they close the day, 100,000 ATV this month, they will get paid on all of that, regardless of cash in the door or when it’s invoiced or billed or when we receive it. And I mean, I know there’s a lot of companies that do different things. Sometimes they do half and half when cash comes in, but we do, we haven’t probably been great about clawing back, but the idea is that if we don’t actually collect that cash, we would claw back. So it’s kind of like you work, we’re prepaying their commissions for them or they get it up front, but we could claw back. You don’t actually see the cash in the door. And one other question pops up about defining OTE. That’s On Target Earnings. Right? So a base salary plus commissions plus bonus.

Lauren Kelley:               And I was going to mention that when we were preparing for this just a few minutes ago about one of the reports, a survey we did about two years ago that was looking at variable versus base salary and then OTE to total on target compensation. Can I ask you, how you split OTE for your new account reps, what you have between the split between base and variable?

Eric Stephenson:           So we, for the most part, try to do 50-50-50 for the reps. As a general rule. And again, there’s some collaboration there with us and this kind of points again to the good working relationships that we have on the sales side and with sales ops it ends up being collaborative. But as a general rule, we’re driving the 50, 50. Sometimes we get people that come in that are more experienced or there’s some other unique situation where they need a higher base and then we’ll reduce the variable little bit. But that’s at least what we try to do.

Lauren Kelley:               And how about multi-year commissions? Do you commission only on the first year of ARR or additional years? And is there a lowering of the percentage? Is it based on whether they pay more than one year up front? That kind of thing?

Eric Stephenson:           We don’t pay more based on how much they pay up front. I think, and I mean, that’s beneficial too, I guess it depends on what your cash situation is, but it also is interesting when you go public, like we are now, that can kind of create some differences. Did you get a bunch of billings in one quarter and then the next year or that quarter, your growth looks kind of wacky so we don’t really intend on getting a ton of cash in the door early on. We’d just be focused on the 12 months up front on the typical standard stuff. But as far as multiyear deals are concerned, we’ve jumped around on this. So we’ve changed this year. We’re going a little bit different tactic, but it’s essentially a skip. So I think there’s a bunch of different ways you can go with, with the multiyear deals.

Eric Stephenson:           But the way we’re going to do this is it’s essentially a spiff that if you sell a two year deal or a three year deal, you’re going to get some incremental percent on top of the first year ACV. So instead of making, say you’re making 10% if you sold it a two year deal, instead of making 10% on that ATV, we give you 12% and we do have an incentive in there as well. If you’re still here when they renew that you’d get another point or something like that, a renewal on that multiyear deal. And we, the other thing that we have, which I think to me is something to seriously look at is also to put in some sort of gate, cause if you, if you make that incentive really nice on the multi-year, you have guys that focus just on the multi-year deals and not on their actual hitting their quota. And so you can end up having some weird unnatural selling and behavior. But we put a gate in there as well. We require a certain amount of a quota attainment before you can actually receive that multi-year incentives.

Lauren Kelley:               I’ve heard all sorts of different things. I think it also depends on the stage that you’re at. And as you mentioned, whether you need cash – earlier stage companies typically are really interested in cash. So if your sales reps sell a multi-year deal but it’s only paid for one year upfront, then oftentimes finance treats it just as a one year deal. He has a contract, doesn’t necessarily mean anything unless it’s paid. But if rep gets two or three years paid upfront, then they get paid on the full value of the deal. But then you have other companies. I remember the CFO of NetSuite saying at one point, he said, you know, look, we’re a very sticky product. We’re running the finances of a company and I don’t want my reps selling more than a 12-month deal because inevitably people always try for some kind of discounts in the second or third year.

Lauren Kelley:               And he said, I don’t want to incent multi-year deals. It encourages discounting if it’s more than a one year deal. And secondly, I want to make sure that my renewal reps, my customer success have the responsibility to make sure they get the renewal. A lot of times with multiyear deals, you can get kind of lazy, Oh, I’ve got this customer for three years. I don’t need to pay attention to them. I’ll go focus on somebody else who’s more at risk. And you don’t want that either because then you’ll lose the customer at some point. So it really relates to a lot of different aspects of your product. And your stage, its different. There’s a lot of other great questions, but one that I’ve gotten a couple on is if you don’t mind sharing with us or you can just give a range, but do you set quota at a 100% of corporate plan or over quota say 125% of plan?

Eric Stephenson:           It kind of depends on the year. It’s been different, you know, depending upon how stretchy those targets are. But I would say on, on average on this street, we’re probably, you know, 110 to 115% of plan. And a lot of that is driven from the sales leaders too. So as we would meet with the VP of that organization.  So we typically try to do at least 10 if we can, 10, 15 I mean 20 would be great as well, but I think we’d been around probably that 10-15 assignment stretch over what our target is.

Lauren Kelley:               And I think that’s fairly standard. I mean some companies, I guess it also depends on what your quota attainment is and what’s your track record is of can you can manage that.

Eric Stephenson:           Because we’ve had years in the past where we’ve had very little over a time just because we have a little bit stretchier goals and we were ramping up new reps and it made it a little bit tough to try to do at 10 50% over a target. But, you know, ideally, and fortunately it worked. I think we’re kind of in that spot now. But yeah.

Lauren Kelley:               Here’s a great question. It’s more of a qualitative question. It’s if your quota attainment is not where you want it to be, or quotas are getting missed, what do you do to try and get reps back on track or to get better statistics in that area fundamentally around quota attainment and having a fully ramped up sales organization? I like looking at that in the benchmarking. There’s a margin between your sales expense and what you’re comp’ing reps and it’s always interesting to see how big that margin is. Usually the fastest growth companies have a higher margin between their comp and total expense, which means they’re investing in training and support to ramp the reps and keep them productive. What are some of the things that you’ve used at Domo?

Eric Stephenson:           That’s probably a real good question. Maybe more on the sales outside, but I think I was going to say training cause that’s when we’ve had in the past where attainment hasn’t been where we wanted it to be. You have to figure out why. I mean, and in some cases it may be your quota is too high. So I mean certainly look at that as well. , but then I think you have to compare that to what the compensation is. But could be quota. So I think look at quota. And then the second thing is, is, you know, maybe it’s messaging or training.  A lot of times in what we’ve done over the last couple of years is invest money into training as well. And I feel like it’s paid off or we’ve had big conferences where we’ve brought in a third party and a done training. We actually just went through one recently and we did another one the year before where I felt like that was valuable and helps to improve that productivity or ultimately attainment of quota.

Lauren Kelley:               Here’s a question about whether you pay sales reps a renewal commission and do renewals pay at a lower rate than for new business. And I have some variations on that, but if you want to answer, is it a part of the sales job to do renewals? Do you do renewals through customer success as a separate organization or through some administrative group that’s just doing renewals?

Eric Stephenson:           For us it’s kind of a combination. We do have a customer success organization and their focus of course is on renewals and, making our customers happy. And then we have historically paid a small commission to all our reps as well. And I know there’s other companies, and seen where you have specifically focused a renewal people, and you don’t actually pay the AE, but that’s the way we do it because we do feel like that, at least the way we’re structured right now, the AE is still somewhat involved in those customers. He’s still trying to create some upsells, and so he’s still involved with that. And we feel like he still has a role in trying to help that renewal. And so they do get a commission. It’s pretty small. It’s definitely nowhere near, and it shouldn’t be in my mind, shouldn’t be anywhere near the first year commission rate. Otherwise that kind of defeats the purpose of the SaaS business.

Lauren Kelley:               Good question:  who verifies the data for commission payout, typically that’s a fundamental responsibility of sales ops, but I’ve talked to plenty of companies where finance gets involved as well because if the information is coming out of salesforce and the sales rep sort of owns the original data input, it’s a great area for complications. A lot of companies are handling it in lots of different ways. It’d be interesting to hear how you’re doing it.

Eric Stephenson:           That’s a good question. Probably a hot topic for all the sales people. So for us it’s a combination of sales ops and our commissions analyst sits in the accounting organization, and so he reports up on the accounting side. I would say it’s a, it’s a combination of our commissions analyst slash his boss and our sales ops. So they kind of work in junction to validate. And again, I mean, I feel like we have a good relationship with our sales ops. So I think it just points to the importance of that relationship where they work with them to make sure to validate the salesforce data and make sure it makes sense. But then ultimately I would say the decision is at the top, but really our commissions analyst and his boss are kind of making those decisions with the help of sales ops.

Lauren Kelley:               Well we could talk about commissions and we could talk about quotas all day long, but I’m keeping on track here. I wanted to launch another poll as we started talking about some of the systems that you’re using and that other companies are using. So let me run the second poll. We’ll launch that: for the audience, please input what systems you’re using. And then I’d love to talk to you, Eric, about how are you tracking and analyzing commissions. Are you doing that in your own app? I don’t know that you can, or you’d have to customize Domo, I guess to do that kind of thing.

Eric Stephenson:           So when I started here we were just using excel, which works, but it’s all a bit of a pain. Right? That’s a lot of work to, it can be monotonous, especially as you grow your sales or and especially if you have a ton of hands in the pot, you know, you’re just, there’s so many layers. But we now use Obero for our commissions software. And so I’m not sure personally with Obero, but was I guess it was Exactly I think at one point bought by Obero. But from what I hear it’s been pretty good.

Lauren Kelley:               Obero was bought by Exactly.

Eric Stephenson:           So, I had the reverse. From what I understand, that’s been pretty effective, and I think they’ve been pretty happy with that software. So we use the software as well as Excel. What we’re trying to do is kind of what you just said. There’s some customization that has to done to push it into our product, to analyze the data a little bit better and some of it too is just around security and when you have, anytime you deal with compensation, you’re trying to be extra careful. So that’s kind of what’s held us back a little bit, but that’s the next step where we’re actually trying to push that into our own product to be able to really do deep dive analysis real time and not require much work. And so we could really see what makes up our commissions every month, every quarter.

Lauren Kelley:               Well that’s kind of cool and given that as I’m sharing the results from the survey I’d love to hear, because I mean you guys are power users of Domo. I’d love to hear a little bit more about how you specifically use Domo and what data you pull into it and what you get out of that.

Eric Stephenson:           So with our own product, we certainly use our product probably to the max and then we have some internal stuff that we’re using as well. On the finance side and even in conjunction with sales ops, so we have hundreds of connectors that go into our product. And so pretty much anything that we have that has data, we can pull that in. And Domo is almost a data warehouse really. And so we’ll pull data in from Salesforce, we pulled in from Adaptive, from NetSuite. Hopefully soon, Obero and a ton of other sources. Gor me we use it a lot, just one to track kind of how we’re progressing on different key metrics. So we’ll pull that salesforce data in so I can always see like, hey, where are we at with sales, with ACV, where we at with commission or with a conversion rates and deal sizes and all those things.

Eric Stephenson:           I just have a Domo dashboard that enables me to see that so that I don’t have to go in and spit out a report from salesforce every day. And so that really helps me as well. And then on the finance side, we push a lot of our stuff in there as well from Adaptive that we’re doing the work and Adaptive. And then we create dashboards, the CFO and other business leaders, sales ops, sales leaders can see kind of see how we’re tracking to those benchmarks to ACV per rep, you know, that productivity and a million other things. So there’s probably a ton I could talk about but that’s kind of it in a nutshell.

Lauren Kelley:               I’m sharing the poll results on the budgeting and planning systems. Still a lot of people using Excel, but then I think the biggest group out here is using Adaptive. Software is definitely a strong vertical for Adaptive, and I know you use Adaptive, I think you said you pull the benchmark data into Adaptive for your budgeting and planning. And then you also use some of the benchmark data in your own dashboards that you’ve built in Domo.

Eric Stephenson:           We pulled all the benchmarks out of OPEXEngine, we kind of spit out all these key benchmarks and we created a sheet, for those that are familiar with Adaptive, that’s an Adaptive term, we actually have a benchmark sheet in Adaptive and we have pretty much every benchmark that you have in OPEXengine I would say in there. And so then we just spit that out from Excel and then we upload it into that sheet so that we have some, when the data gets updated for the New Year, we just upload the new sheet. And so we store it in Adaptive, and then from there we actually do push it into Domo. And I have a couple of dashboards that are just benchmarks and all those benchmarks come from OPEXengine. And then they also compare it to our actual data so that we can look at CAC, LTV to CAC, renewal rates, percent of expenses as a percentage of revenue. All those things. And then I’ll share that with business leaders so that we can kind of stay on track or at least they know where we’re at and it’s a conversation piece and we have monthly calls or meetings or whatever it is.

Lauren Kelley:               I’m going to stop sharing the results of the poll and put that away as we’re wrapping up and then I can take some more of the questions. If you had to state what your best practices are, you think in terms of really aligning finance with sales and having a productive relationship that helps the company and is efficient, what would you say your best practices are?

Eric Stephenson:           I think that’s probably when we think about planning and I think the best practices in my mind is being in sync and not operating in two separate silos in parallel. And I’ve seen that as well. Like in the past, I’ve had that before where a sales ops kind of put together, they’re saying, even though we have the same targets, so kind of putting together their thing, we’re putting together our thing, then we meet and, it just doesn’t work out very well. And usually we’re not that aligned and then we’re bickering over assumptions and how we got to this or that. So I think the key in planning, especially as we’re talking about sales planning, it’s a work hand in hand with the sales ops leader and have one system that you’re using.

Eric Stephenson:           So whether it’s Adaptive, and that’s what we decided to do, and our sales ops leaders are where he’s perfectly fine with us using Adaptive. We meet, we talk them through things, and then we’ll update that data in Adaptive and share reports. And then we’re all just kind of aligned to that one source of truth on the planning side. So they don’t have their own thing going on the side. And that’s the basic help to be the fastest. I think you execute better because it’s something you put together with sales, not something finance put together alone. It’s not something we gave them but it’s something they were collaborative that we decided together and we’re all driving to the same metrics. And if you use benchmarks, you use metrics I think everybody drives to the same goals. And again, it’s not coming from finance, it’s not our plan, but it’s not finances plan, but it’s our plan as a company. So that’s at least for me, how I’ve found the most success really with any planning, but particularly on the sales side just because there’s so much to it.

Lauren Kelley:               That’s terrific and going back to the systems, it’s interesting somebody asked, how does HR fit into the comp plan design and planning? And that brings up the question. If you’re using Adaptive, for example, does HR have an access to Adaptive and can they participate in the planning from that perspective?

Eric Stephenson:           Our HR does not have access to Adaptive. I mean we sort of share with them but they don’t have a user. But I would say it’s collaborative, but with HR as well I don’t know if I would say they’re heavily involved in it, but they’re certainly involved in some of it is, kind of working with them to figure out what’s reasonable compensation, what’s benchmarks and they’ll look at radford for comp data and things like that and give us feedback on what makes the most sense. So they helped with that process, I would say, and then at the end we’re collaborating with them as well since they own recruiting typically, and we’re working with them to try to design or to make sure that when they’re recruiting that it’s aligned with what our plan is and it makes sense with them from our perspective. At least that’s how we do it.

Lauren Kelley:               And then we didn’t get to talk as much about the actual numbers and finance being one source of truth. And we touched on it a little bit in terms of validating the commissions, but I think it’s really important if you can lay out your process in terms of their data that comes out of salesforce and then there’s data that comes out of your financial systems and your invoicing system or billing systems. You know, it sounds like, I think when we were talking, you said finance owns the numbers ultimately and you’re the one source of truth. Can you maybe lay out how those systems work and how you make sure that you’ve got one number for the number of customers and one number for CAC and one number for retention?

Eric Stephenson:           I would say it’s kind of a combination, but certainly anything that is a financial statement related to of course, it can be owned. And in the finance organization I say on the planning side of course playing, like all the targets are owned by FP&A, and that’s, everyone just kind of knows that looks to us. If it comes to targets, they’re going to look to us and say, what was the final targets? CAC, all those kinds of metrics, they’re all pretty much owned by FP&A for the most part just because most of them are driven by some sort of cost or renewal rate or something like that. On the ACV customer account, it’s probably kind of a combination because since it all comes out of Salesforce, we work with sales ops to determine those numbers and make sure that they make sense.

Eric Stephenson:           It’s kind of collaborative. That there customer counts and a deal sizes of those kinds of things that the CRM data. But I would say it’s still really collaborative. And I think the nice thing for us is just that we use our own products that we have. We have dashboards that are kind of, we’ve said, hey, this is a source of truth. And so everyone just kind of follows that. That’s what ACV was, that’s what customer count was. That’s what deal size. And these are the sources of truth that come from our CRM, but we’ve kind of signed off on those specific dashboards. So we’re all kind of aligned. I would say we typically don’t have much of misalignment when it comes to that.

Lauren Kelley:               I have some last specific questions. Just to wrap up here. I was also going to mention that as we come towards the top of the hour we’ve been running a sales survey. I know you guys participated in, a lot of other companies did. We ran it through the end of March, but if anybody is on this Webinar, we’re spending this week here at OPEXEngine cleaning and validating the results. We’ve got a great set of companies participating. It was sponsored by Insight Squared as well as Adaptive, so went out to their channels as well. If you want to participate, you can still get your participation in this week, if you want to shoot me an email, Lauren@OPEXEngine.com, but otherwise we’re closed and only the participants get the results. So we’ll be excited to see that. A couple of questions that I’ve gotten. And if anyone wants to throw in any more questions into the Q and A, now’s the time to do it and we’ll try and get to it.

Lauren Kelley:               So one of the questions is, is Salesforce, the system of record or truth for the SaaS metrics?   And I guess that would just be the customer SaaS metrics, not, you know, necessarily CAC or things like that. But do you want to speak to that?

Eric Stephenson:           Salesforce would kind of be the source for some metrics, just when it comes to stuff that you would get out of Salesforce I guess. So ACV, although, I mean really we signed off on that. But ACV, your customer account, those kinds of things. As a general rule, most of them, the key metrics that we’re following are either ACV driven or they’re calling the cost side or maybe renewal rate. So it’s probably kind of a combination. Anything that’s like customer type stuff, really. Yes, I would say Salesforce.

Lauren Kelley:               And another question, do you pay commissions monthly or quarterly?

Eric Stephenson:           We pay monthly.

Lauren Kelley:               Is there a system that you’re using a specific application for defining recognized revenue and, and deferred revenue?

Eric Stephenson:           On the planning side, of course we use Adaptive, so we have stuff built in on the planning side for recognizing revenue. We just have waterfalls and different things that are built out in Adaptive for planning. On the actual side that we use NetSuite as our ERP. I’m not on the accounting side, so I’m not involved in that. But I know they have all those schedules built out within NetSuite in the modules they have.

Lauren Kelley:               I guess that definitely answers that and those suites have all the systems in place for recognizing revenue.

Eric Stephenson:           Exactly.

Lauren Kelley:               Do you use 12 month rolling forecast to keep a 12 month forward active planning horizon as the vehicle for building the budget for the next year? Or how does that work?

Eric Stephenson:           We actually always really have a couple of years out. But I would say if you look a couple years out, of course it’s not going to be like super solid. I wouldn’t sign my life away on the forecast two years from now. We always have a couple of years out so we’re always doing some sort of rolling forecast. The current year is where we put most rigor behind. So I feel most comfortable around our current year forecast where we usually have at least three years actually in forecast when we kind of, back when we were pre IPO, when we’re raising money with investors, they always want to see something like that. So we’re kind of in that habit where we always have several years out.

Lauren Kelley:               We won’t ask you the sort of analysis between forecast and actuals when the time came around. Hopefully it gets better and better over time. Hopefully bigger and bigger. And that’s the value of a SaaS company. So one question just as we’re wrapping up someone asked what deal desk meant, and I apologize for not explaining that, but actually, Eric, why don’t you describe how you’re doing deal desk or you’re planning on doing it right now.

Eric Stephenson:           So your deal desk is essentially the individual that kind of sits with the person that helps to make sure that all your deals are structured and put together correctly. They’re kind of working with sales in order to validate that that everything is structured the way that it’s supposed to. And it’s aligned with the way we designed like comp plans and different rules that we have around discounting and all the different rules we have in place or pricing or whatever it is. And the deal desk person is the kind of that person that sits there and works with sales and make sure that the deals are structured the way that they should. That’s why in some ways it helps to be in the sales side and that’s why we went the sales route is because that person can kind of be viewed more as an advocate and you hope that that person is because it helps to get your deal structured correctly so you don’t have problems later on. And that these customers were new because it’s structured correctly upfront and so that’s kind of what we put in sales so that they view it more as their advocate and their partner and not a finance guy, you know, that is there to try to crack down on their deals.

Lauren Kelley:               I think that’s a great point because typically deal desk is kind of a police function of making sure that the contracts are structured properly, especially when you’re talking about bigger contracts. And usually most companies have some, some minimum level before it would go through deal desk where you might allow variations on some standard structure that you have around discounting around payments, around the contract structuring that can effect revenue recognition. And so having it sounds like it’s a great idea. Having it in sales so that even though their function still is to police the deals, it’s from a friend as compared to a cop., it’s less threatening.

Eric Stephenson:           Correct. Got It.

Lauren Kelley:               Well, so we’re going to wrap up. We’re just over the top of the hour and thank you so much, Eric. This was great and really appreciate your wealth of sharing with us. It’s been a lot of fun working with you for the last couple of years in the benchmarking community and appreciate it. So if anybody has more questions, feel free to send them in. You can send them on our website under resources, SaaS Q and A, or just email and we’ll do our best to answer it. But thanks everybody. And looking forward to springtime. Take care everyone. Have a good afternoon. Bye.

Share this:

Submit a Comment

Your email address will not be published. Required fields are marked *

WHAT OUR CLIENTS ARE SAYING

GET WEEKLY INSIGHTS + TRENDS ON SAAS METRICS

Why join our email list? Get important insights delivered straight to your inbox and receive access to reports before public release. We promise not to spam you or sell your name to anyone. You can always unsubscribe from our content at any time.

WordPress Video Lightbox Plugin
Site Menu