Fix your SaaS sales comp plan to reduce churn, motivate reps, and drive predictable growth. Learn proven strategies and real examples.
Here’s the uncomfortable truth: your sales comp plan might be the reason your customers keep churning. I’ve seen this play out dozens of times, and there’s a way to fix it.
Radha called me on a Thursday afternoon, and I could hear the frustration in her voice.
“I don’t get it,” she said. “We’ve got product-market fit. Our demo-to-trial conversion is solid. But our churn numbers are terrible, and my sales team seems to care more about closing than actually helping customers succeed.”
Radha’s story isn’t unique. Her startup was doing everything “right” on paper — good funding, decent team, strong early traction. But there was this nagging problem that kept getting worse each quarter.
Her best sales rep had just closed three deals in two weeks. Sounds great, right? Except two of those customers canceled within 60 days. The third was already asking for features that didn’t exist and threatening to leave.
The issue wasn’t her product or her market. It was something most founders never think to examine: her sales compensation plan was incentivizing all the wrong behaviors.
I see this mistake constantly. Founders copy compensation structures from traditional software companies or bigger enterprises, not realizing that SaaS is a completely different game. When your revenue comes from keeping customers happy over years, not just getting them to sign a contract, everything about how you pay your team needs to change.
Let me tell you about my own screw-up. At my second company, we were crushing our new customer targets. Month after month, the team was hitting 110–120% of quota. I was feeling pretty good about our comp plan.
Then I looked at the six-month retention numbers.
We were losing almost half our customers before they hit their first renewal. Our Customer Acquisition Cost was through the roof because we kept having to replace churned revenue. That “successful” comp plan was actually costing us about $2M in lifetime value.
The problem was obvious once I saw it: We were paying reps the same commission for a customer who stayed two months as one who stayed two years. Our incentives were completely disconnected from business outcomes.
Traditional enterprise software works differently. You sell a perpetual license, collect a big upfront payment, and move on. Your commission is earned whether the customer uses the software or not.
SaaS flips this on its head. That $50K annual contract only becomes valuable if the customer renews. If they churn after three months, you’ve lost money on the deal when you factor in acquisition costs, onboarding, and support.
But most comp plans ignore this reality. They pay reps like we’re still selling perpetual licenses in 2010.
Look, I’m not going to give you some theoretical framework that sounds good in a boardroom but falls apart in practice. This is what actually works when you’re trying to build sustainable growth: