What is a Sales Accelerator?
How to calculate sales accelerators
Here is an example of how sales accelerators are generally calculated and awarded based on quota attainment rates.
Example 1: A SaaS company offers a base commission rate of 10% on all sales. Once the sales rep reaches their quota of $100,000 in monthly recurring revenue (MRR), their commission rate increases to 15% on all additional MRR generated.
- Sales rep generates $100,000 in ARR, earning a commission of $10,000 (10% of $100,000)
- Sales rep then generates an additional $50,000 in ARR, earning a commission of $7,500 (15% of $50,000)
- Total earnings: $17,500
In the above example, the sales commission accelerator incentivizes the sales rep to generate more revenue or acquire more new customers by increasing their commission rate once they exceed their quota. This structure can be effective in the SaaS industry or sales organization, where sales cycles can be longer and involve recurring revenue streams.
Benefits of deploying sales accelerators
- Increased motivation: Sales commission accelerators incentivize sales reps to exceed their sales targets by offering higher commission rates for exceeding quotas. This can increase motivation and drive sales reps to work harder and sell more, ultimately leading to higher revenue for the business.
- Improved performance: By offering higher commission rates for exceeding quotas, sales commission accelerators can improve the performance of sales reps. This can lead to faster sales cycles, higher close rates, and increased revenue for the business.
- Greater alignment: Sales commission accelerators can help align sales reps' incentives with the business's goals. By tying commission rates to specific targets, sales reps are motivated to achieve the objectives that are most important to the business.
- Increased retention: Sales commission accelerators can be an effective tool for retaining top-performing sales reps. By offering the potential for higher earnings as they exceed their quotas, sales reps are incentivized to stay with the company and continue to perform at a high level.
- Enhanced sales culture: Sales commission accelerators can help create a culture of achievement and success within the sales team. By rewarding top-performing sales reps and motivating others to achieve higher targets, your team can become more motivated, competitive, and effective at generating revenue for the business.
Downsides of having sales accelerators as a part of sales comp plans
Sales accelerators, if used right, can prove to be an effective growth lever which can positively impact an organisation’s revenue. However, there can also be a couple of downsides to having accelerators as part of sales compensation plans.
Here are some of the major drawbacks of using sales accelerators:
- Complexity: Sales commission accelerators can be complex to implement and manage, especially if they involve multiple tiers or quotas. This can create administrative burdens for sales leaders, operations, finance and the organization as a whole.
- Misaligned incentives: If sales accelerators are not designed properly, they can lead to misaligned incentives. For example, if the targets set for the sales reps are unrealistic or not aligned with the business's goals, it can make reps optimize for the wrong metrics, focus on the wrong activities or even engage in unethical behavior to reach their targets.
- Unequal treatment: Sales accelerators can lead to unequal treatment of sales reps, with top performers earning significantly higher commissions than lower performers. This can create resentment and demotivate those who are not achieving high sales targets.
- Cost: Offering higher commission rates for exceeding quotas can be costly for the business, especially if many sales reps achieve their targets and earn higher commissions. This can put pressure on the business's margins and profitability.
- Limited effectiveness: Accelerators may not be effective in all situations. For example, if the product or service being sold is not in high demand or if the sales cycle is long and complex, sales commission accelerators may not be enough to motivate sales reps to perform at a higher level.
In conclusion, sales accelerators can be a powerful tool for motivating sales reps to exceed their targets, improve their performance, and close deals that generate more revenue. By offering higher commission rates for exceeding quotas, sales commission accelerators align sales reps' incentives with the business's goals and create a culture of achievement and success within the sales team.
However, implementing sales commission accelerators can be complex and requires careful consideration of the sales process, targets, and commission rates. Furthermore, sales commission accelerators may not be effective in all situations, and can potentially create misaligned incentives, unequal treatment, and cost pressures for the business.
Overall, sales accelerators can be a useful tool in the sales manager's toolkit, but should be approached with caution and designed thoughtfully to maximize their benefits and minimize their drawbacks.