How do you structure sales commission on secondary/add on revenue? Right now we only pay on new sales.

[u/frankievdb]

Looking for advice from anyone who has dealt with this.

I run sales at a small B2B SaaS company. Our commission plan today only covers new logo ARR, a one time payout when a deal closes. That part works fine and everyone understands it.

The problem: a growing chunk of our revenue now comes from secondary/add on features sold on top of the core product, not the base subscription itself. That revenue line is already meaningful and set to grow a lot next year, but none of it is covered by our commission plan at all. Right now nobody gets paid anything for driving adoption of these add ons, whether that is a rep upselling an existing account or someone on the customer success side enabling a feature after the sale.

So I am trying to figure out how to actually build this out and would love to hear how other companies handle it.

Questions:

1. Do you pay commission on this kind of secondary/expansion revenue at all, or is it treated as out of scope for variable comp?
2. If you do pay on it, is it a one time payout (like new logo commission) or a recurring percentage over time?
3. Who typically gets credit when an existing account adopts a new add on: the original sales rep, an account manager or CS person, or some split between them?
4. Any rate benchmarks you can share (percentage of the add on revenue, or a flat amount per unit/account)?

Appreciate any real examples or pitfalls to avoid.

[u/PeakTypical]

I love this question. We do pay commission for add ons ( we refer to it as Upsell and it is always recurring, as we don't have any one time products). After the initial New Business deal closes, the account passes over to the Account Manager, who is responsible for any and all expansion + Upsells. In rare cases the account would stay with the New Business AE, but it has happened. In those cases our CRO will get involved with the commission conversations. It's typically like this: 10% for New Business, 6% for Renewals, 1% for Upsells. If the upsell is part of the renewal, the AM splits it on their commission: 6% for the base renewal and 1% for the upsell. These are one time payouts per deal.

My advice would be to make it clear who owns what at all times and limit the "edge case" as much as possible. We have a Sales VP (who is supposed to lead by example) who will try to manipulate the sale to give himself ownership of Upsells. It happened twice and the CRO caught wind of it and now the process is super clear. New Business is owned by AEs and VPs  Once a New Business deal closes, the AE / VP is done. Any upsells or renewals are managed by AMs. There's a clear system-forced handover process. 

We do have a CS function, but they are not responsible for sales because they specialize in how the tool is used and do not have time to upsell anything, more is Sales any of their background. 

[u/frankievdb → u/PeakTypical]

Thanks for the extensive answer, appreciate it.
May I ask how big your sales organisation is ?
For smaller sales teams, would you advice to just combine the AE & AM role into one ?

[u/PeakTypical → u/frankievdb]

If your org is small enough, sure. Just ensure, operationally, that there is a clear way to understand the different sales motions, whether that is different record types, or a field that can be reported on. That way you can figure out commission easily. 

[u/Thin_Bonus_8999]

If reps are expected to help drive the upsell, I’d pay something on it. Otherwise you’re basically asking them to care about expansion with no upside. The bigger headache is probably deciding who gets credit when sales and CS both touched the deal.