Annual Contract Renewal Revenue Attribution

[Yooper]

I’m having a real issue trying to assign revenue attribution in a subscription-based (annual contract) sales model where reps are paid on three revenue types:

1. Rep 1 – responsible for net new business (initial licenses purchase)
2. Rep 2 – responsible for expansion (licenses added)
3. Rep 3 – responsible for renewal (licenses renewed)

Problem Scenario:

First year:

• June - New customer purchases 50 licenses at $200 per license ($10,000); contract renewal date established for June the following year
• September – Customer adds 60 licenses at $175 per license (volume moved the customer into a new pricing tier). Paid = $8,750 pro-rated through license period (60 licenses multiplied $175, divided by 12, multiplied by 10 months)
• October – Customer adds 10 more licenses at $175 per license = $1,312 pro-rated (10 X $175/12 X 9 months)
• Fiscal year ends in December:
  • Net new revenue = $10,000
  • Expansion = $10,062
  • Goal for renewal = $21,000 (120 licenses multiplied by $175)

Second year:

• February – The same customer adds 100 licenses. Paid $7,292 pro-rated through plan end date in Jun (100 X $175/12 X 5)
• April – Customer adds 50 more licenses at $150 per licenses (total volume moved the customer into a new pricing tier) = $1,875 (50 X $150/12 X 3 months)

The simple part:

• Rep 1 is simple: $10,000 in net new revenue
• Rep 2 brought in $10,062 in the first year and $9,167 in the second year

Where I’m stuck:

• The goal for renewal based upon the first year was $21,000
• 100% plan renewal in June the second year is $40,500 (270 total licenses multiplied by $150)
• Rep 2 is compensated for the pro-rated amount only (actual amount paid in the month paid)
• How do I provide a renewal goal for Rep 3 based upon the expected renewal amount from the first year that doesn’t exceed 100%...without having a moving target, and accounting for all revenue?

(Thank you in advance for help)

 

[Ishuda]

I’m having a real issue trying to assign revenue attribution in a subscription-based (annual contract) sales model where reps are paid on three revenue types:

1. Rep 1 – responsible for net new business (initial licenses purchase)
2. Rep 2 – responsible for expansion (licenses added)
3. Rep 3 – responsible for renewal (licenses renewed)

Problem Scenario:

First year:

• June - New customer purchases 50 licenses at $200 per license ($10,000); contract renewal date established for June the following year
• September – Customer adds 60 licenses at $175 per license (volume moved the customer into a new pricing tier). Paid = $8,750 pro-rated through license period (60 licenses multiplied $175, divided by 12, multiplied by 10 months)
• October – Customer adds 10 more licenses at $175 per license = $1,312 pro-rated (10 X $175/12 X 9 months)
• Fiscal year ends in December:
  • Net new revenue = $10,000
  • Expansion = $10,062
  • Goal for renewal = $21,000 (120 licenses multiplied by $175)

Second year:

• February – The same customer adds 100 licenses. Paid $7,292 pro-rated through plan end date in Jun (100 X $175/12 X 5)
• April – Customer adds 50 more licenses at $150 per licenses (total volume moved the customer into a new pricing tier) = $1,875 (50 X $150/12 X 3 months)

The simple part:

• Rep 1 is simple: $10,000 in net new revenue
• Rep 2 brought in $10,062 in the first year and $9,167 in the second year

Where I’m stuck:

• The goal for renewal based upon the first year was $21,000
• 100% plan renewal in June the second year is $40,500 (270 total licenses multiplied by $150)
• Rep 2 is compensated for the pro-rated amount only (actual amount paid in the month paid)
• How do I provide a renewal goal for Rep 3 based upon the expected renewal amount from the first year that doesn’t exceed 100%...without having a moving target, and accounting for all revenue?

(Thank you in advance for help)

Rep 3 (renewal) is a moving target. The questions are "When does the renewal target get updated?" and "Do I project ahead?"

 

[Yooper]

Hmmmm....is this real-life (you are an employee) or
is it a classroom-assigned problem?

Classroom (Enterprise SaaS sales modeling). My group presented the problem...and can't solve it.

 

[Yooper]

Rep 3 (renewal) is a moving target. The questions are "When does the renewal target get updated?" and "Do I project ahead?"

Renewal target gets updated after 12/31 for the new fiscal year beginning 1/1...which is at the heart of the problem if the fiscal year needs to be forecast. I could set a do not exceed 100% threshold, but that leaves a lot unaccounted for in the modeling.