Summary Results from the Softletter 2009 Telesales Compensation and Efficiency Survey, Part II of IV

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1 Wednesday, Sept.30th 2009 Vol. 25, No. 18 BUSINESS INSIGHTS FOR SOFTWARE DEVELOPERS & PUBLISHERS Summary Results from the Softletter 2009 Telesales Compensation and Efficiency Survey, Part II of IV Softletter s SaaS University: Selling, Marketing, Infrastructure and Finance Conference comes to the Lone Star State! 30 Sessions, Five Tracks, Five Keynotes, Four Workshops Jan , Dallas/Ft. Worth, TX Softletter Subscribers Save $200 on Their Attendance Our 2009 Telesales Compensation and Efficiency Survey continues providing valuable information and insight into best practices and metrics on this key activity. Publisher & Managing Editor Merrill R. Chapman rickchapman@softletter. com 860/ Editor Randy Hujar randy.hujar@softletter. com 860/ Editorial office Soft letter 34 Sugar Hill Rd. Killingworth, Conn Voice: 860/ Subscription office Aegis Resources 34 Sugar Hill Rd. Killingworth, Conn Voice:860/ Fax: 860/ The Softletter 2009 Telesales Compensation Software Marketing Survey was launched in September of 2008 and closed at the end of October. The survey was designed to analyze current best practices and metrics for software firms who rely primarily on telesales to generate the bulk of their company s revenue. We are including key information from our 2009 Direct Sales Compensation and Efficiency Survey at key points in these results reports in order to provide contrasting views of the underlying dynamics of each sales model. The survey recorded 106 valid responses with 52 respondents reporting their title was CEO or a variant, 14 a senior VP sales position, and 20 a director-level sales position. Other titles included CFO (2), CTO (1) and business development (2). Findings of particular significance are bold faced. Numbers are averages unless otherwise indicated. Percentage totals may not equal 10 because of rounding. If you answered Increase in commission percentage, please indicate below how much increase in commission a telesales representative receives as compensation for their exceeding quota: % 1% 2% 3% 4% 6%+ Response Total 1 to 3 (12) 11 to to 5 51 to 7 11% 76 to 10 11% % 3 (12) 5 (10) 4 (16) 37% (14) 37% (14) 32% (12) 1 3 (12) 21% (8) (2) (2) (0) (1) (0) 1 (2) 11% (2) (40) (13) 26% (5) continued on page two

2 If you answered Fixed Monetary Bonus or combination, what was the average bonus paid to a telesales representative for their exceeding quota? Responding 19 Median% $3,250 What is the average time it takes to close a major telesale? End of call 2 4% 3 days or less 0 10 days or less 4 3% 10 to 30 days 31 26% 30 to 90 days 37 31% 3 to 6 months 26 22% 6 to 9 months 12 9 to 12 months 4 3% 12 months+ 0 Other, please specify 4 3% What is the average time it takes to close a major direct sale? Less than three months 19 1 Three to six months 42 33% Six to nine months 31 2 Nine months to a year 24 19% A year to 18 months 6 18 months+ 4 3% What is the average time it takes to close a major telesale? (Desktop/Retail) End of call 2 3 days or less 0 10 days or less to 30 days to 90 days to 6 months 0 6 to 9 months 0 9 to 12 months 0 12 months+ 0 Other, please specify SOFT LETTER 2

3 What is the average time it takes to close a major telesale? (OEM) End of call 0 3 days or less 0 10 days or less 0 10 to 30 days 0 30 to 90 days to 6 months 0 6 to 9 months 0 9 to 12 months 0 12 months+ 0 Other, please specify 0 What is the average time it takes to close a major telesale? (On-Premise, Client Server) End of call 0 3 days or less 0 10 days or less to 30 days 15 39% 30 to 90 days 11 26% 3 to 6 months 4 6 to 9 months 2 9 to 12 months 2 12 months+ 0 Other, please specify 2 The narrow distribution of close rates in the Desktop/Retail and OEM categories reflects the fact that sales of these products are made in markets with fairly fixed buying cycles, such as into distribution and reseller channels. Softletter What is the average time it takes to close a major telesale? (SaaS) End of call 2 3% 3 days or less 0 10 days or less 6 7% 10 to 30 days 16 27% 30 to 90 days to 6 months 4 13% 6 to 9 months 2 3% 9 to 12 months 2 3% 12 months+ 0 Other, please specify 2 continued on page four 3 SOFT LETTER

4 Telesales Close Rates: All Time Periods Desktop/Retail OEM Client/Server SaaS End of call 3 days or less 10 days or less 10 to 30 days 30 to 90 days 3 to 6 months 6 to 9 months 9 to 12 months 12 months+ Other, please specify An analysis of telesales close rates reveals several interesting datapoints. The first is that telesales close cycle is shorter than the direct cycle; not surprising given that telesales deals products typically cost less and reach a decision point more quickly. Most telesales close no later than nine months out from the beginning of the sales cycle, with the majority closing within 90 days (62%). Another point of interest is that while telesales SaaS firms enjoy an advantage in speed of close rates, the difference is not as great as it is with companies relying on a direct model. Nonetheless, the ability of 37% of SaaS companies to close business within 30 days is a notable metric. A quick drill down into the numbers reveals that the larger the deal size, the slower the sale (again, not a surprise). How soon do your telesales personnel receive their variable compensation after the close of a sale? Immediately or next pay period 2 2% Within a month 33 41% Within 45 days 13 Within three months 6 8% More than three months 2 2% After payments are received from customers 22 28% Other, please specify 2 2% SOFT LETTER 4

5 Aggregated Telesales Close Rates: Client/Server vs. SaaS % to 12 months 30 to 90 days 30 days or less % Client/Server SaaS Aggregated Direct Sales Close Rates: Client/Server vs. SaaS % 33% % 32% 4 11% 12 months+ 6 to 12 months 30 days to 6 months 90 days or less Client/Server SaaS continued on page six 5 SOFT LETTER

6 How soon do your telesales personnel receive their variable compensation after the close of a sale? (On-Premise, Client/Server) Immediately or next pay period 0 Within a month 12 29% Within 45 days 8 6% Within three months 4 6% More than three months 0 6% After payments are received from customers 4 47% Other, please specify 0 6% Time to compensate rates are often an excellent way to understand growth patterns within an industry or sector. Softletter How soon do your telesales personnel receive their variable compensation after the close of a sale? (SaaS) Immediately or next pay period 2 7% Within a month 12 4 Within 45 days 8 27% Within three months 4 13% More than three months 0 After payments are received from customers 4 13% Other, please specify 0 When comparing On-Premise, Client/Server time to pay rates with SaaS, some interesting comparisons arise. Given the recurring nature of the on demand model, you would expect to see payments tending to be doled out over a longer period of time. In fact, the opposite is true it is client server firms who are slower in paying their representatives. One factor that may account for this is that many SaaS firms are in growth mode and must pay their personnel promptly to further drive growth and maintain sales force morale. By contrast, during slow economic times, companies in low growth markets tend to finance their companies by slowing the flow of sales commissions and thus conserving cash. How soon do your telesales personnel receive their variable compensation after the close of a sale? (Desktop/Retail) Immediately or next pay period 0 Within a month 8 67% Within 45 days 2 17% Within three months 0 More than three months 0 After payments are received from customers 2 17% Other, please specify SOFT LETTER 6

7 Prudent M&A, Part II of II M&A by Robert Chalfin, The Chalfin Group For anyone to seriously consider an acquisition in today s climate, all parties from the buyer(s), to their advisors, equity partners, and lenders should be comfortable that the business is on strong financial footing and it is beneficial to purchase the target now as opposed to waiting for a few months or years, when the price may be the same or lower, to make the deal. There are many reasons why a buyer would consider making an acquisition in today s economy. The financial buyer may believe that the price of the target will not decline and the future benefits from the purchase will more than offset the amount paid. Succinctly stated, the buyer may believe that the worst has past. Strategic or synergistic buyers will still consider acquisitions when they feel the deal will: Allow the combined entities to generate greater profits than they will separately, Enable the buyer to gain an advantage over its competition, Provide new marketing opportunities, Better utilize the combined entities resources, Expand their customer base, Allocate their fixed costs and prior R&D over a larger group of customers, and Prosper in new markets. In addition to the financial and strategic/synergistic buyers, extreme bargain hunters are always trawling the market looking to purchase distressed businesses at very low prices. Any acquisition is always contingent on the buyer s access to capital. While borrowing continues to be a challenge for most businesses, many community banks, along with the larger regional and money center banks continue to lend, but only after requesting and receiving more assurances, security, collateral, guarantees, and overall comfort than ever before. Lenders and investors are also requiring that the buyers contribute more equity to the deals than in the recent past. Business owners who sell their businesses in today s capital-starved times are becoming more creative. Some are agreeing to receive a portion of the purchase price over time or selling less than a hundred percent of the business and retaining an equity interest with the hope, and expectation, of harvesting additional benefits when business and the economy improves in the future. As a result, to satisfy the concerns of both the buyer and their capital sources, it is prudent for business owners who are contemplating a sale, now or at some time in the future attempt to annuitize their business. That is, structure the business model so their operations generate a predictable revenue stream that can satisfy a lender s concerns about the business having the ability to service its debt. continued on page eight 7 SOFT LETTER

Pareto Analytics Resources Project Smart (www.projectsmart.co.

8 Pareto Analytics Resources Project Smart ( Site provides a very useful tutorial on the use of pareto analysis (or the 80/20 rule) to implement various quality improvement analyses. PMCrunch ( Site provides a useful tutorial on the usefulness of using pareto analysis to help balance choices during the product development and project management cycle. QI Macros ( Site provides a series of macros that can be used with Excel to automate the creation of pareto charts. SigmaXL ( Site provides a series of advanced analytics tools including Pareto Pro; useful for advanced analysis within Excel. Trial download available. Colleagues made off with your last issue? Go to com. Click Subscriber Login in the upper right of the home page. To view the current issue and to search archives of hundreds of articles by keyword, topic, or issue date, log in and enjoy! Soft letter is published 24 times per year; entire contents copyright 2009 by Soft letter. All rights reserved. Reproduction by any means, without permission of the publisher, is prohibited. ISSN: Subscription rates: $395 worldwide. Subscription office: Aegis Resources 34 Sugar Hill Rd. Killingworth, Conn Voice:860/ Fax: 860/ info@softletter.com SaaS businesses are particularly well-suited to adopt to this phenomenon. Customer contracts can be structured to provide secure monthly, quarterly, or annual rent payments into the future. During many times in our nation s history fortunes have been made with the genesis being well-conceived acquisitions that were made during poor economic times. The current period may not be different than other economically challenged periods and for the right buyer and seller, this market forces may create opportunities that may not be easily duplicated in the future. Robert Chalfin, CEO, The Chalfin Group, 45 Bridge Street, Metuchen, New Jersey, 732/ ; bob@chalfin.com. The Atlantic writer Harris Collingwood on whether CEOs matter: Perhaps to ask whether the CEO really matters is to ask the wrong question. Three Harvard professors Noam Wasserman, Bharat Anand, and Nitin Nohria say in a recent paper that the right question is, When does leadership matter?...they conclude that leadership matters sometimes. It doesn t make much difference at electrical-utility companies, which are so constrained by government regulations and the cost of fuel that there s very little room for the CEO to exercise any discretion. The professors used the term Titular Figureheads for such CEOs...At the other end of the spectrum, CEOs in some industries have a great deal of discretion. They re known as Unconstrained Managers. In a company such as Research in Motion, Motorola, or, for that matter, Apple, the CEO is the one who decides which new cell phone to release to a waiting public, which chip company will supply the integrated circuits that make it work, and which phone-service providers to partner with. (Quoted in The Atlantic, 11/07/2009) ZDNET columnist Tom Foremski on how the lack of IPOs is huring the US economy: The lack of IPOs is certainly harming the Silicon Valley economy. With few IPOs, capital isn t being returned into the VC funds, and the cycle of innovation is sputtering. (Quoted on Foremski/?p=933&tag=nl.e539, 11/06/2009) SOFT LETTER 8

Summary Results from the Softletter 2008 Marketing Survey, Part IV of V. PPC (Pay Per Click) Campaigns (cont.)

Summary Results from the Softletter 2008 Marketing Survey, Part IV of V. PPC (Pay Per Click) Campaigns (cont.) Wednesday, Dec. 31, 2008 Vol. 24, No. 24 BUSINESS INSIGHTS FOR SOFTWARE DEVELOPERS & PUBLISHERS Next month we ll be releasing the latest versions of the Softletter Financial and SaaS reports. Softletter