Dear SaaStr: How Do You Compensate Reps on Multi-Year Deals?

When multiyear SaaS deals include upfront cash, how you pay commissions shapes everything. SaaStr explores the issue: in early stages when cash is critical, paying full commission on all prepaid cash accelerates growth—but it can fuel deep discounting to entice customers into multiyear contracts. As the company matures past ten million dollars in annual recurring revenue, that incentive becomes dangerous without careful guardrails. After an acquisition, one company learned this lesson the hard way: the new revenue operations team removed guardrails on discounting and paid full commission on multiyear deals—even those without upfront cash. A sales rep responded by offering a lifetime deal worth two hundred thousand dollars, a structure that would pay him over one hundred fifty thousand dollars annually for more than a decade. The takeaway: sales compensation must evolve as a company scales, and boundaries must hold.

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