If you identify SaaS as something your mother told you never to give her — think again. Software as a service, or SaaS, is software that’s accessed, managed, and used on the internet. It’s the present and future of software, and it requires a different type of selling.
Whether you’ve just taken a sales role at a SaaS company or creating a SaaS product, this guide will teach you everything you need to know about the basics of SaaS sales. From commission to sales cycles, models, and metrics, you’ll learn the different ways of selling this unique software and what you can expect from the job.
- What is SaaS sales?
- SaaS Sales Salary
- SaaS Sales Experience
- SaaS Sales Cycle
- SaaS Sales Model
- How to Sell SaaS
- SaaS Sales Strategy
- SaaS Sales Metrics
What is SaaS sales?
SaaS sales is the process of selling web-based software to clients. Salespeople focus on acquiring new customers and upselling or retaining current clients. Service and attention are key to getting the prospect to close, because SaaS reps are usually selling at a higher price.
As a new or prospective entrant into SaaS sales, you might be unfamiliar with what a SaaS product is. But you’ve likely used a SaaS product in the past without knowing it.
What is SaaS?
SaaS stands for software as a service. It is a type of software hosted, secured, and managed by a single provider. It can be accessed online, easily customized, and is serviced and supported by the provider’s own product engineers and customer success team.
Remember the days of unwrapping CD-ROMs, uploading them to your computer, and only having access to that software from your computer? Those days are gone. SaaS is hosted, secured, and updated by an outside vendor.
This means SaaS often yields lower entry costs than traditional software, offers easier upgrades, and enjoys better integrations. What's left is a more advanced, user-friendly, and evolving product.
Examples include HubSpot, Google Workspace (formerly G Suite), and Adobe Creative Cloud.
Why is SaaS sales different from other types of sales?
When you work in either direct or channel sales, you can typically expect to sell a physical product or a service that’s directly delivered shortly after purchase.
SaaS does not work that way. Because SaaS is supported, maintained, and engineered by an external company, the price is usually high, requiring a longer sales cycle and more touch points from Sales and Marketing before the customer is ready to buy.
Marketing nurtures each lead until they are "sales qualified." Then, a salesperson follows up with the prospect to gauge next steps. Just because a lead is sales qualified doesn't mean they're ready to buy — or ready for a demo.
SaaS salespeople must clearly communicate the benefits and features of their software. And it’s important to tailor each presentation to meet the needs of each prospect. Reps also must be well-versed in how the software works to demonstrate and troubleshoot the product during presentations.
Because SaaS can be so complex, it’s common to bring engineers, executives, or product marketers into some meetings to make a difficult sale. Knowing when to ask for help is another sign of a qualified SaaS rep.
SaaS Sales Salary
Because it's necessary for SaaS reps to have a deep working knowledge of the software, product roadmap, and frequently asked questions, their base salary and commission is usually higher than reps in other verticals.
Here are three benchmark studies to illustrate the average salary for SaaS sales reps:
- Job aggregator ZipRecruiter calculated the national average base salary to be $78,898 for a SaaS account executive.
- Workplace hub Glassdoor calculated the average base salary for a SaaS specialist to be between $24,000 and $96,000.
- And The Bridge Group, an inside sales consulting firm, calculated the average base salary for a SaaS account executive to be $79,000 — with on-target earnings of $158,000.
Let’s sum it all up.
What is the average SaaS sales rep's salary?
The average base salary for a SaaS salesperson is $68,705 based on data from ZipRecruiter, Glassdoor, and the Bridge Group. Commission is usually added to the base pay and awarded when a salesperson meets or exceeds quota.
SaaS reps generally have a higher base pay than other salespeople because of the training, expertise, and high motivation they need to succeed.
As with most sales jobs, commission is commonly added on top of the base salary and varies per individual compensation plans.
SaaS Sales Commission
SaaS commission, like other sales verticals, is paid when a rep closes new business or renews existing accounts. It’s awarded based on monthly recurring revenue (MRR) or annual contract value (ACV).
Some organizations wait for new clients to submit payment before awarding commission. This model is meant to avoid paying commission on a customer that churns quickly or reneges on their agreement.
The accelerator model of commission means for every dollar a rep brings in over goal, their commission rate increases by a percentage point (i.e., if a salesperson attains 115% of goal, their commission rate increases by 15%).
Other organizations tier their commission rates. In this model:
- The first tier of compensation covers 100-110% attainment.
- The second tier covers 110-125% attainment.
- And the third tier covers 125% attainment and beyond.
For those salespeople hitting the third tier, the President’s Club is often offered as a prize.
Some compensation packages won't disburse commission until a rep brings in enough revenue to cover their base salary and the cost of their benefits. Once they've closed enough business to cover their cost, however, these reps usually receive commission at rates more than double those of a normal model.
With both base pay and commission, SaaS sales reps can expect to receive plenty of compensation — but it varies depending on the level of the role.
SaaS Sales Compensation
How much should you expect to be paid as a junior, mid-level, and senior SaaS salesperson?
The average base salary for a junior SaaS role is $48,217, based on Glassdoor’s data.
The average base salary for a mid-level SaaS role is around $79,000, based on data from both ZipRecruiter and the Bridge Group.
Senior SaaS sales managers earn from $93,000 to $114,000, as reported by ZipRecruiter.
Each of these roles have different sales experience requirements. Typically, as you move up in SaaS sales, you can expect to face elevated qualification criteria.
SaaS Sales Experience
Entry-level SaaS sales representatives usually start with zero experience in sales.
You’ll typically receive all the training you need on the job. SaaS selling is a highly specific art and radically different from other types of selling. Plus, software companies want you to learn how to sell their product specifically — so they spend plenty of resources and funds on sales training courses and materials.
That said, let’s go over the expected experience for each level.
Junior SaaS Sales Experience
A junior or entry-level SaaS sales representative has 0-2 years of experience.
Most SaaS companies will require a bachelor’s degree. Job experience requirements will be minimal or not mentioned at all. To get started in SaaS sales, you’ll need to have a strong desire to learn how to use and sell the company’s specific software.
Here’s a list of qualifications for a junior sales role at HubSpot:
“We’re looking for people who have a track record of high achievement, excellent written and verbal communication skills, previous successful sales experience OR a strong desire to begin a sales career, the ability and desire to work in a fast-paced, challenging environment with peers who challenge you to be better, and the desire to meet and exceed measurable performance goals.”
Mid-Level SaaS Sales Experience
A mid-level SaaS sales representative has 2-5 years of experience.
Some mid-level SaaS roles will require you to work in a managerial capacity, coaching and guiding a small team. Alternatively, you can work as a more advanced account executive, handling delicate or highly profitable contracts.
Here’s a list of qualifications for a mid-level sales role at HubSpot:
“We are looking for people who have at least 2+ years of experience leading and coaching a quota carrying team; experience in successfully mentoring and/or leading others effectively; experience leading a consultative sales process; experience using CRM to manage and forecast sales opportunities; strong analytical skills to identify trends and patterns; and strong communication skills in written, verbal, and PowerPoint forms.”
Senior SaaS Sales Experience
A senior SaaS salesperson, such as a senior sales manager or a senior account executive, has an average of 5-7 years of experience.
Senior SaaS sales roles typically require experience specifically in SaaS sales. If you were selling a physical product before, your best bet would be to apply to an entry-level or mid-level role.
Here’s a requirement list for a senior sales role at HubSpot:
“We’re looking for people who have 5+ years minimum experience, ideally in but not limited to the software/SaaS industry; strong consultative selling and C-level experience; strong analytical and problem solving skills; a history of working with a partner channel; and a sharp focus on your goals and a strong approach for achieving them.”
Regardless of the role you apply to, it’s important to understand the SaaS sales cycle. If you own a new SaaS business, you should also understand how long it can take for your sales reps to reach a closed deal.
SaaS Sales Cycle
SaaS sales cycles vary depending on price, customers, and product complexity. A product that’s $100/month will have a faster sales cycle than a product costing $50,000/year.
The more expensive your product is, the more stakeholders will be involved, which can lengthen your process by weeks or even months. Here are four additional factors that slow down SaaS sales cycles:
- New markets: If you’re selling to new markets, your sales cycle might be longer because you're spending more time communicating your use case and value to potential clients. This will extend your sales cycle, but it’s crucial to educate new markets before selling to them.
- Enterprise business: Selling to enterprise-level companies increases the number of stakeholders needed to sign off and is usually accompanied by more legal and technical red tape.
- Complex software: Similarly, the more complex your software is, the longer your sales cycle is likely to be. In this case, it’s important to make sure the right prospects are in the room during your demo to champion your cause to less savvy colleagues.
- Free trials: Free trials can also affect SaaS sales cycles. If you offer a 30-day free trial, this could lengthen the sales cycle significantly.
Still not sure how long the sales cycle could be? On average, as a sales rep, you can expect to stay in contact with a prospect for weeks.
If you’ve found a SaaS company, you should also expect your sales cycle to be quite long, though the exact timing will vary wildly.
How long is a SaaS sales cycle?
The length of a SaaS sales cycle varies depending on the annual contract value (ACV) of a deal. The average length of a sales cycle is 84 days regardless of the ACV. For an ACV of less than $5K, the cycle will last around 40 days. If the ACV is upwards of $100K, the cycle will last 170 days — around five and a half months.
Sales reps don’t have much control over the length of the sales cycle. But if you’re a SaaS business owner, you can take some steps to shorten it.
If your sales cycle takes too long, consider cutting a free trial from 30 days to two weeks. Bring in a professional writer or storyteller to help you communicate your complex software offering in a more understandable way.
And work with your marketing team to educate new markets before conducting outreach. Lastly, if you know your sales cycle will be lengthy due to enterprise clients or other factors, build that time into your budget. No salesperson can perform well under unrealistic goals.
SaaS Sales Model
The proper sales model indicates how many salespeople you should hire, how you'll interact with your customers, who they are, and how you'll close their business. It's crucial to choose the right model and know when your organization needs to evolve.
If you’re a prospective SaaS sales rep, you should also understand the different models so you can show off your knowledge during your sales interview.
Continue reading to understand the three most common SaaS sales models.
Transactional selling is the most common and the most scalable of the three models. This software is typically sold to small and medium businesses over the phone and occasionally in person.
Since the cost associated with this level of software is generally higher, the buyer requires more personalized service to make a purchase, thus necessitating a sales team.
Software sold by the transactional model should also be customizable to service the needs of a variety of use cases. Contracts generally range in price and reps are empowered to provide discounts and share tiered pricing models.
These salespeople have a pipeline fueled by a marketing team, and they're required to undergo training, exhibit a comprehensive working knowledge of the product, and meet monthly or quarterly quotas.
This model works best when selling lower-priced SaaS at a high volume (i.e., Spotify subscriptions, a Medium membership, or a phone plan). It assumes your average selling price, or ASP, is low, while allowing you to bring in significant revenue.
Freemium models and free trials are common strategies for attracting customers in the self-service model. Customer service is not comprehensive and this model often can’t support a full sales team. Instead, websites encourage users — usually individuals or small teams — to sign up online.
This model is reserved for software sold at low volume and high price. These solutions are often full-scale, highly specialized, or cutting edge. Enterprise salespeople will regularly spend months working closely with prospects to answer questions, demo the software, and meet with executive stakeholders.
Enterprise sales is a popular choice for complex or niche SaaS products that benefit larger companies or corporations with the budget to support the high cost of these solutions. Sales teams are often organized by territory and focus on a targeted set of prospects.
Because there are so many working parts to this sales model, reps work closely with product marketers and engineers to source the answers and information they need to close high-value deals.
Here's a bonus tip for you: Know your ASP. A higher average selling price (ASP) means your prospect will expect inclusive customer service, a better business relationship, a signed contract, and invoicing.
Before hiring your first salesperson or starting a career in SaaS sales, understand your average selling price so you can forge better relationships with customers.
Now, how can you sell your SaaS product as either a company or a rep? Let's go over that below.
How to Sell Software-as-a-Service (SaaS)
Selling a SaaS product is different than selling other products. Because the sales cycle is longer, it gives you more chances to hook prospects. Here’s how you or your sales reps can sell your SaaS offering.
1. Create strategic trial periods.
Many SaaS providers have a free trial offering as part of their sales process. A free trial is a great way to hook new users; however, in order for it to be worthwhile, your approach has to be strategic.
When a customer has the opportunity to do a trial, they are able to see the true value and benefit of your offering. While there is no one-size-fits-all rule for how long the ideal trial period should be, here are some common trial lengths to consider, along with their benefits.
- 7-day trial period: If you offer a simple or straightforward product that a new user could pick up and adopt quickly, having a short trial period could be a good option. Additionally, if you offer a lower-cost product and don’t want to add unnecessary length to your sales process for a modest sale, you may also want to consider having a brief trial run.
- 14-day trial period: A two-week trial period is common practice for many SaaS providers. For companies that sell SaaS B2B or have products with multiple tiers and added complexity, this trial period length could be a good sweet spot. While 14 days is still relatively short, it is enough time for a user to explore various features and benefits of the product while being brief enough to not hold up the sales process.
- 30-day trial period: For companies that have more complex offerings, or who take an enterprise approach to selling, an extended month-long trial could be a better option. Additionally, if there are various stakeholders who need a say on the implementation of a product, having a longer trial period can be useful.
2. Stay in contact with your prospects during the trial.
Regardless of how long your offer period is, it’s important to maintain regular communication with your prospects while they are trying the product. By checking in with them during the trial period, you can hear their feedback real-time, and you can keep them engaged and interested in the product. For many trial offers, buyers are left on their own to explore, making it easy to lose momentum.
In addition to staying in contact with your trial users, the trial period can provide valuable insight on their usage and behavior patterns, which can give you a good indication of how likely they are to buy, and how they would use the software after purchasing.
3. Provide valuable demos.
The last thing you want to do is create an information overload situation for your prospects who participate in demos. For SaaS providers, the ability to conduct an effective demo is incredibly important.
A good demo should demonstrate the value of your product, not overwhelm prospects with redundant information about features. One of the best ways you can prepare for demos is by researching the buyer and understanding what problem they want your software to solve. When you know what they’re looking for, you can walk your prospect through hypothetical scenarios that are relevant to them, clearly demonstrating the value of your software and how using it will make their life easier.
Aim to make your demos as straightforward as possible, walking the prospect through simple ways they can receive the most benefit from using your product, and leaving plenty of time for any questions they may have.
4. Leverage annual plans.
Many SaaS companies charge customers on a monthly subscription model to use their product. Though that’s a great way to bring in recurring revenue, including an annual subscription model can be a helpful strategy for pulling in more funds upfront and improving customer retention.
By encouraging buyers to prepay for a year of your software at a discounted rate, it can provide necessary cash for your business and decreases the likelihood for cancellation.
5. Upsell and cross-sell existing customers.
Upselling and cross-selling your existing customers is one of the best ways to boost annual recurring revenue. This practice isn’t sleazy; rather, it helps you provide more value to your customers as they require additional features, bandwidth, and services.
This method typically works for B2B SaaS businesses that offer different subscription tiers or levels. Just be sure that you or your sales reps tailor the upselling pitch to each prospect.
6. Gather feedback.
To increase software adoption in your target market, you’ll need to understand how to improve the product. If you’re a rep in SaaS sales, ask your current customers how they’re enjoying the product with a quick check-in email. Following up can help you cement your relationship with them, too, making it easier to upsell later.
If you’re the owner of a SaaS company, implement a company-wide customer satisfaction survey initiative. Have either your marketing or service team send them out to customers who’ve been using your product for a while. Based on the findings, you’ll want to act quickly and roll out the improvements. Don’t forget to check in with customers once the improvements have been implemented.
7. Use a CRM.
Because of its long sales cycle, SaaS sales are particularly susceptible to forgotten details and conversations. If customers are investing hundreds and even thousands of dollars in a software solution, however, they’ll expect a level of care and attention unseen in other verticals.
For that reason, you’ll want to use a CRM to keep track of all customer details and ensure nothing slips through the cracks. Knowing your customers well can lead to a better relationship and a closed-won deal down the line.
Click here to start using HubSpot CRM for free.
For optimal performance, merge these tips with a company-wide SaaS sales strategy.
SaaS Sales Strategy
Crafting a profitable SaaS sales strategy can be done both at the organizational and individual level, but more commonly it’s established by a higher-up or even the owner of the company.
Here are the steps you’ll want to take to create a sales strategy for your SaaS business.
1. Choose a SaaS sales model.
First up, choose a SaaS sales model. This will depend on the nature of your product, but you have three choices, which we covered above. You can adopt the transactional sales model, customer self-service model, or enterprise sales model.
Most new SaaS businesses will be served well with a customer self-service model. As your company grows, you can consider going into transactional and enterprise sales.
2. Identify the target audience and create a value proposition for your software.
Identify the target audience by creating buyer personas and outlining the problems they face.
Follow the “Target Audience, Problem, Solution, Value” format to create an easy-to-scan summary of your software’s value proposition. Here’s what that looks like:
- Target Audience: Whom do you serve?
- Problem: What problem are they experiencing?
- Solution: How can your software help them solve it?
- Value: What value or results can they expect from using your software?
For instance, here’s a description for Sales Hub:
“For sales teams (Target Audience), friction is the ultimate foe. Stitching together individual point solutions and managing their complexities? It slows you down and stalls your growth. (Problem)
Sales Hub eliminates friction by bringing all your tools and data together on one easy-to-use, powerful platform your whole team will love. (Solution) Now you’re freed up to focus on what really matters: your customers.” (Value)
3. Set prospect qualification criteria.
Now that you know whom to target, it’s time to set further sales qualification criteria. The truth is, if your software is handy enough, it can serve plenty of customers and prospects.
But you don’t want to target just anyone. Sales reps have limited time, and chasing unqualified prospects is a sure way to waste precious working hours and fail to meet quota. Learn how to qualify leads, then set targeted qualification questions that you or your sales reps can ask to weed out unqualified prospects.
4. Create a sales playbook with email templates, call scripts, and closing techniques.
You know whom you’re targeting and who’s qualified to become a customer. Now it’s time to create a sales playbook that you can use across your entire organization to increase the chances of a closed-won deal.
A sales playbook will contain everything your sales reps need to nurture prospects. Email templates, qualifying questions, call scripts, and closing techniques are just a few of the materials you can include. You can also add general information about the state of the industry, as well as a cheat sheet containing common characteristics of your target buyer personas.
5. Set activity and revenue goals for sales reps.
A sales strategy isn’t complete without objectives and goals. Setting activity goals and sales quotas will ensure your sales reps feel empowered to meet objectives for the betterment of the business.
You can set volume quotas (e.g. “Sell 50 premium subscriptions a month”) or profit quotas (e.g. “Sell $25,000 in revenue every quarter”).
Activity goals can be measured by the number of phone calls, emails, meetings, LinkedIn connection requests, and more.
7. Create a robust customer support program.
While this is technically not part of a sales strategy, creating a strong customer support program can help you sell the product better. Why? By knowing when and where customers run into snags, you can improve the product — thereby increasing good word-of-mouth and product adoption.
Not to mention: Consumers increasingly take customer support into account when making a purchasing decision. By providing winning customer support, you can ensure your current customers stay with you and tell others about their experience.
6. Keep track of sales performance using key metrics.
Last but certainly not least, keep track of sales performance by tracking key metrics. That way, you can adjust goals as needed and celebrate wins for your company.
You can use a sales automation software such as Sales Hub to automatically keep track of the metrics.
If you’re not sure what to track, no worries. We go over the most important SaaS sales metrics below.
SaaS Sales Metrics
- Net Promoter Score
- Monthly Recurring Revenue
- Annual Recurring Revenue
- Sales Qualified Leads
- Lead Velocity Rate
- Revenue Per Lead
- Customer Acquisition Cost
- Closed Won/Lost Deals
- Demo-to-Trial Ratio
Here are a few key metrics SaaS salespeople and businesses should track.
Your churn rate is the percentage at which you lose customers on an annual basis. To calculate churn, divide the number of customers you’ve lost by the number of customers you started with. It’s worth noting that a negative churn is a good thing — meaning you gained more customers than you lost.
2. Net Promoter Score
Net Promoter Score (NPS) measures customer experience and predicts business growth. Users answer a single question using a 0 to 10 rating scale. For example, "How happy are you with [insert SaaS name]?"
A score between 0-6 would label your customer a "detractor" who's unhappy with your brand and could stunt growth with negative reviews or word of mouth. A score of 7-8 means your customer is "passive." They’re satisfied with your product but might be vulnerable to competitive poaching.
And if a customer scores you between 9-10, you’ve got a "promoter" on your hands. This person is a loyal enthusiast, likely to be a continued customer and refer new business.
To calculate your NPS — which ranges from -100 to 100 — subtract your percentage of detractors from your percentage of promoters.
If you have a low NPS, it matters less how much business you’re bringing in, because your customers are likely churning at an alarming rate. A high NPS, however, signals satisfied customers and the potential for sustainable growth.
3. Monthly Recurring Revenue (MRR)
This is the income your company knows will arrive every 30 days. A monthly fee is agreed upon in the contract between client and SaaS provider, and the amount is paid on or by a certain date.
4. Annual Recurring Revenue (ARR)
This metric is often used by SaaS and other subscription-based businesses. The annual recurring revenue (ARR) represents the value of recurring revenue your client agrees to pay on an annual basis.
5. The Number of Sales Qualified Leads
A sales qualified lead (SQL) is a potential buyer whom data indicates is ready to talk to a salesperson. This doesn’t mean they’re ready to buy, but they’ve taken a series of actions that predicts an inclination to learn more.
The definition of a qualified lead will differ depending on your solution, audience, and sales cycle. Salespeople often rely on IBM’s BANT system for identifying SQLs. BANT simply asks if your lead has the budget, authority, needs, and timeline to buy. If so, it’s time to reach out.
6. Lead Velocity Rate
How quickly are your leads growing month over month? Even if MRR growth is steady, this might only indicate how you’re doing in the moment, instead of forecasting future growth.
The lead velocity rate shows reps whether leads are coming in faster than revenue, which allows you to calculate growth, goals, and milestones further out.
7. Revenue per Lead
By measuring the revenue each rep brings in per lead, you can estimate an accurate number of leads a rep can manage before productivity suffers. Look beyond the MRR and improve or maintain rep performance.
8. Customer Acquisition Cost
Divide the total cost of Sales and Marketing by the number of deals closed to learn your customer acquisition cost (CAC). This number will be lower for companies using a transactional sales model and higher for organizations focused on enterprise sales.
If your customer acquisition cost is too high, you might be scaling too quickly. If you have a low CAC, look at areas where you can invest in growth or increase revenue.
9. Closed Won/Lost Deals
A deal is marked "closed-won" when a contract is signed or payment is rendered. Alternately, if a prospect selects another solution, you might mark this deal "closed-lost."
It’s important to study the number of closed-won and -lost deals. These metrics are closely tied to overall revenue numbers, but figuring out a rep’s ratio of closed-won to closed-lost deals can signal their overall efficiency, success, and fitness for the job.
10. Demo-to-Trial Ratio
If your SaaS requires a demo, carefully track how many of those presentations turn into trials — and how many of those trials turn into closed-won deals. If the conversion is low, address weaknesses in your demo, trial, or closing protocol.
SaaS Sales is All About Providing Value
Selling a SaaS product may be different than other types of selling, but the essence remains the same: it’s all about providing immeasurable value to your prospects and customers. With the tips and strategies we’ve shared, you’ll be sure to start a lucrative career in SaaS sales — or, if you’re planning to create a SaS product, you’ll be sure to boost annual recurring revenue year-over-year.
Editor's note: This post was originally published in November 2017 and has been updated for comprehensiveness.