One of the most common questions for early startups — who should handle upgrades?

If I HAVE to pick, most of the time, I’d say:

Customer Success should handle upgrades.

But there’s a number of different considerations specific to YOUR business!

Here’s what I’ve seen from the front lines and what questions to be asking about your particular product, company, and team!

It’s worth spending time thinking it through because — in the words of the late Charlie Munger —

Show me the incentives, and I'll show you the outcome.

Everything Is Possible

Here are different sales/customer success/commission configurations I’ve seen:

• Sales gets commission on new logos; customer success handles upsells and renewals but no commission

• Sales gets commission on new logos; customer success gets commission for renewals; sales and customer success split commission for upsells

• Sales gets commission new logos; customer success gets commission on renewals and upsells

• Sales gets commission on new revenue (including upsells); other teams get commission on their specific focus like renewals, upsells, product area

And 100 other variations.

What’s the right way?

Depends what you’re optimizing for!

Here’s a few examples:

• Want the world’s greatest customer experience? → no commission

• Want to aggressively expand existing accounts? → commission to “hunters” for upgrades

• Want to focus on renewals? → give more commission for renewals than upsells

All that said, for most startups, here are 3 questions to consider…

1. How Important Are New Logos?

MOST startups want their “hunters” aka sales people focused on getting new companies or “logos.”

Yes, you can get more revenue, more easily, at less cost from existing customers. It’s tempting to focus on the easier money.

BUT — in the eyes of investors and looking at long term growth trajectory, you can always upsell later (by improving your pricing strategy, for example).

A repeatable, cost-effective playbook for getting new customers is the #1 priority in the early days.

Yes, customers need to stay with you (renewals) and get more value over time (expansions). These are important measures of a healthy business.

But if your new business sales funnel is not working, renewals and expansions don’t matter!

Large companies focus more on account management. They have many products to sell and different parts of a company to sell into.

Don’t be tricked into copying a mature company sales structure!

What works for Salesforce today isn’t the optimal setup for your startup.

In the early days (for most companies), it’s a land grab for customers!

2. Is “Land and Expand” a Key Strategy?

Who is the target customer for your company?

How large are the initial deals compared to expansion opportunities?

What about the complexity of the sale?

As an example, at Rigor, we sold to large companies including F500s.

We followed a scrappy, startup strategy though.

The sales person would “land” a small deal, usually within 1 team or 1 project. The manager could pay for the software monthly via credit card — quick sale, no red tape.

When they saw good results, we’d work to “expand” into a 6-figure deal, navigating big company complexities like legal, procurement, and multiple stakeholders.

Not a process for the faint of heart!

We wanted our best hunters working that process so sales reps received commission on the expansions.

For comparison, an expansion at Pardot would be $1000/yr or maybe $12,000/yr for a very large one. Very different business case for $100,000 vs $12,000 expansions!

Where does your company fit in terms of deal size, complexity, and expansion potential??

3. What Else Is Unique About Your Business?

We have a company in our portfolio with a very sticky product and 99% retention rate.

I highly recommend they NOT focus on the renewals process. 😂😂😂 If it ain’t broke, don’t fix it!

This is not upgrades, per se, but an example of “normal rules do not apply.”

What is unusual about your customer, product, or business?

Should you adjust your account management strategy in some way?

Maybe you have multiple products, self-serve upgrades, main users who are not buyers, huge amount of referral sales, a robust partner network, one pricing package, or some other factor that means the “usual” suggestions don’t make sense for you.

That’s okay!!

You do you!

The whole point of building innovative companies is that something will be new and old paradigms evolve. Maybe this is where you break the mold!

4. Who Is On Your Team?

People think org structures are created from business strategy.

FALSE.

Org structures, especially at early stage companies, are usually a result of who can handle what. 😂

(That said, I LOVE Molly Graham’s post on Designing Power Centers Strategically. I recommend startups follow this! I also know that sometimes you hire the best people you can find and figure it out as you go. 😁)

So - think about the people on your team currently and their skill set.

• Brilliant sales person who doesn’t have patience for account management? Let them “hunt” and hand off!

• A Customer Success Manager with a strong sales background? Maybe they “Land and Expand” your large customers.

• A highly technical support person not inclined toward account management? Have your sales team do upgrades.

You need to be consistent across everyone in the same role but look at the cast of characters as you’re deciding your strategy.

This applies to managers or executives too. They will be best at (and default to) hiring and training what they know and their own strengths.

Expect It To Change

Remember: YOU CAN ITERATE AS YOU GO!

You’ll have new learnings, new team members, new products, new types of customers, and evolving business strategies.

When something isn’t working or it could be better, change it!

It’s not uncommon to have pricing and/or commission structure change frequently (2-4x/year?) at an early stage company. You want to be fair to employees and keep the right incentives for your sellers, of course! Explaining why and showing the business math behind the decision can help with a change.

Even at large companies, commission and org structures change annually.

You can also use SPIFFS, challenges, bonuses and other incentives to test new selling strategies!

Who handles upgrades at your company? How did you land on that? Other advice or iterations you’ve seen that work well?

Would it be helpful to see some example incentive or compensation plans? Reply or comment to let me know!