This is the third in my series on SaaS Metrics for Enterprise-Driven B2B Networks.
I spend very little time on issues of compensation on this blog. But it turns out, this is a really important issue for Enterprise-Driven B2B Networks. As discussed in the prior post, many networks of this type, subsidize one side of the network, to make money from the other side. Often, as with P2P, payments, Order to Cash, and EDI networks, there may be a significant time lag between:
- the bookings or cash—if any—coming from one side, and
- the eventual bookings or cash coming from the other side of the platform. (And often, the revenue from one side of the network is transactional, not subscription.)
Put on the CFO’s Hat
I cannot tell you how much mayhem each of these issues causes. Think about these questions from the CFO’s point of view:
-What should I pay an enterprise sales representative who hunts a new enterprise customer with low or no bookings from the enterprise itself, but a likely large, though a delayed stream of revenue from the enterprise’s supply base?
-How should I value transactional revenues that cannot be booked in advance because they are billed as incurred, not as a subscription?
-What should I do if the two above issues are combined? Should I force everything into a subscription model, so I can count them as bookings? Should enterprise salespeople “farm” what they “hunt” to align their incentives to the company’s revenues?
There are no perfect answers to these questions. But if you are:
- doing the analytics suggested by the last post
- transparent with all parties involved in the process (e.g., sales, finance, customer success, and supplier enablement)
- aligning incentives of all of those groups based on the same metrics
you will work your way through these issues over time.
Welcome to the world of many of two-sided, enterprise-driven businesses! If you are going to get in one, be prepared to spend plenty of time on issues of compensation!!