Would you take a 100% commission business-to-business sales position?
I wouldn’t, nor will I take on any company that insists on such an out-dated pay structure.
The turnover rates are just too high (something like 99% of commission-only sales reps fails to make a livable wage and are forced to leave for greener pastures) and it’s nearly impossible to find A-Players willing to accept this type of position.
What’s more, those sales pros who do manage to succeed in a 100% commission sales job tend to be risk-takers with a strong entrepreneurial bent. They soon decide that they would be much better off putting their talents to work in their own ventures.
In short, the 100% commission sales position is a lose-lose proposition.
Curious to see how my position matched up with others in the business, I asked my LinkedIn connections for their views on whether or not a salesperson who was unwilling to take a commission-only sales position was simply not hungry or motivated enough to generate revenues.
The responses came in fast and furious, and it was soon apparent that I am not alone in my distaste for commission-only programs.
Notes one respondent: “…Great salespeople are looking for companies that will invest in them in order for them to continue their successes. Like an all-star athlete negotiating the next contract, no one, especially with proven skills, will take the entire risk without a blanket… The player knows there is a risk – in baseball, it might be a physical injury. In sales, the injury might be competitive pricing, customers losing budget, product failure, delivery failure, poor customer service, etc. such [that] the salesperson can’t hit the ‘$15MM’ payout. There is no blanket for the rep.
And, most likely, many other teams (companies) will gladly pay that All-Star a market rate which then puts the original team at risk of losing not only the player but the customers that player will attack. Pay your superstars and they will certainly pay you. After a time, when they have made their mark, offer them the opportunity to move to 100% commission. If they don’t, it doesn’t mean they aren’t hungry and motivated. It means they are smart.”
Another respondent was a bit more judicious, noting that it depends upon what is being sold and the sales cycle: “If you are selling products/services that are a “one-call-close” (Insurance, Mary Kay, Amway), a 100% commission compensation system is the only one that makes sense. You can also go straight commission on products/services that have a short cycle like one or two months (Mortgages, Real estate) but the commission per sale needs to be substantial to carry folks through to the next sale.
If you are dealing with long sales cycles (over three months) you will have to pay salary plus or your sales personnel will not be able to survive until the payday. It has nothing to do with dedication or hunger. It is really all about being able to support your family. In all cases, the better performers enjoy the largest compensation.”
So where do you stand on the issue?
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I believe the comments about this subject are right on the mark, companies that just pay on a commission only basis or as some of them hid it in a guaranteed draw which in reality is “you’re only as good as last week/month are taking advantage of salespeople and not rewarding them with a blanket of protection, which should be provided to hard working employees.
100% commission us very old-school. It demonstrates that what you are selling is a commodity product that should be sold over the internet or through catalogs. Personally, I would even consider residential real estate a commodity sale.
If a business wants:
-Long term Sustainability (meaning that the sales people can support their family and you have less than 10% sales person failure) so you can invest in your sales force.
-Long term Loyalty (meaning, the best won’t jump ship for the competition or go into business for themselves), and
-Long term Stability (able to retain the best even in tough market conditions) delivering consistent results,
Then a 100% commission sales plan is NOT the answer. It works against the above objectives. It only works for business models where you essentially need a breathing body, where nano-second sales cycles are the norm, and where having 90-100% sales rep annual (in some cases monthly) turnover doesn’t hurt due to the low investment in the reps (Insurance, cars, telesales, Amway, real estate, door to door, get rich scheme du jour..etc)
Hi,
Great topic for discussion!
I’ve had the opportunity to sell and manage under 3 compensation plans –
100% commission
Salary plus bonus
Draw versus commission
Each plan meets the needs of the respective industries right or wrong. As an experienced Sales Manager I can say that it is a challenge to manage & coach 100% commissioned sales reps.
In the Realestate and financial services (stock broker, life insurance ) these industries have always paid 100% commission and have always been under great scrutiny for using strong armed unethical sales closing tactics. Don’t get me wrong, there are some very good ethical commisioned only sales peolple that get results however, I have found (in my experience) with 100% commission you get what you pay for. In working with commissioned sales reps the mentality is “I am paid to only sell” which worked well in the 1950’s to 1980. In todays competitive business enviorenment buyers want a product expert and solution provider, buyers are educated and require sales peolple with good busines skills. Unfortunately, the majority of commssioned sales reps are not skilled business people.
In salary plus bonus systems you definately get a more complacent personality, however, you are paying for a long term player / thinker who can be coached and controlled. You get what you pay for with a 100% commissioned sales person versus a salaried rep. With the right salaried rep you are investing in and growing your business for the long term.
Question –
In respect to your sports analogy – would you really want to compensate a player based on wins only? Imagine the type of team / or player that was paid only when he or she won a game.
I think these comments are spot on. The problem is now EVERY mom and pop wannabe is making 100% commission offers to Everyone in the Sales role. I personally have been offerred 100% commission to resume the same responsiblities I have as VP of sales at a $150K Base + +. It seems all of the knowlege and legacy work that I would pass along setting up an entire sales organization is worthless to them.
I challenge any professional to put out a resume these days and not expect to get ltterally dozens of these type of offers every day. Many years ago I did take one of these offers that promised so much and once my organization I had built from scratch became wildly successful the Ceos Nephew from Canada flew in and replaced me.
It it my humble opinion that if you do not want to pay any type of Salary then you should be willing to consider the work the people do as sweat equity because it IS a financial investment to work for a company for FREE.
It can be as much as $40,000 investment for most senior executives. How much Stock could THAT buy.
Anyway I have not seen one company yet be successful with this high turnover low morale system and if they cannot afford the best then …….
Nick
100% commission plans allow employers to over-hire reps and weed out the ones that sell less. As tough as sales is, you’re also competing with your colleagues!
100% Commission programs…..
I’ve seen it all…companies that bring people in with a straight commission program, only to fire them later over some trivia event, and then hand the now very profitable territory over to a family member or croney.
Too often, companies with little to no capital to invest in sales, opt for the 100% commission position. This is the lose/lose if you believe that you get what you pay for.
I do believe that a 100% commission Sales Job can be an attractive way to further incent top performers and allow them to make more money. I recall a comp plan I was on at AT&T back in the late 80’s that allowed sales people to choose between 70/30, 50/50 and 30/70. Once you picked a plan, you had to stick with it for the year. It gave new sales reps with little to no pipe, a nice salary while they grew thier business. It gave the more tenured reps a way to earn a higher comp factor if they went with a higher risk/reward package.
This type of example is a win/win. I agree that most of the 100% comp positions are set up to lose, as this is where they start, not where they evolve to.
This may be a little self serving but here it is…
Purchasing a product or service from individuals that earn their income SOLELY based upon commission (called a 1099 position) before buying from “big-box-company” is an indication of a realization that without a purchase, there is no income for that individual. This applies to both individuals and businesses.
In this “rant” I am not referring to home based businesses or multi-level organizations; although there is a strong correlation.
I am not inferring every product or service someone sells should be bought by you. That borders on the inane! Especially when you find the product or service unprofessional or has a lack of quality.
Support can be a myriad of efforts:
1. Actual purchase or usage of the product or service (of course); If applicable…repeatedly.
2. No purchase but ONGOING word of mouth referral support;
3. Continually urging someone to purchase because you did (or will)
4. In the very least, hearing that person out in their sales efforts.
Many people who are on hourly wages or salary cannot understand the pressures of those whose sole means of income is derived from their efforts.
Services or things that could be in the “1099” commission only arena:
Food (Shwan’s)
Handyman or contracting services
Pest control
Banking / Insurance / Financial Advisor
THANKS FOR TAKING THE TIME TO READ MY RANT. LOL
I’ve never gone to Las Vegas and I don’t gamble anywhere.
I own a startup and had sales person base salary 4k and then 8% commission he didn’t do any sales he is know 100% commission after a employee improvement plan and has more sales he almost bankrupt my company and pretty much left me with no options because I couldn’t at end afford to take on another sales person
By the way its 4k per month
Thank you all for the input on this thread. I am in the process of putting together a sales team for my small start up company and have been thinking about a 100% Comm. position. I provide janitorial services and would be paying 100% of the monthly contract value as the commission structure. Sell a $1,500 per month cleaning contract, get paid $1,500. I have a data base to pull from and will be providing training/direction. In addition, my CRM allows me to assist with follow up and assist in closing sales.
My company is still a little small and we cannot afford a salary+ position. We are also not dependent on new sales like retail centers. We currently cash flow just fine and have a small amount of excess every month that we set aside as retained income.
I am looking to have someone work as little, or as much as they want, and count any contracts they bring in as additional growth outside of my won efforts. Similar to many Realtors in my area who are using their license as a secondary source of income, not a primary. Then, when they get good at real estate, they quit the 9-5 and do real estate full time. I personally bring in 3-5k per month in new contracts and only work at it 2 days per week. I also have some contracts over 20k per month, with my average being $1,300.
I’d love your thoughts on the idea. It is very similar to paying per lead, or for a birdwatcher, but they would be required to facilitate closing the deal, not just setting the appointment.
A great book on the topic is “100% commission and death of the big box realty” by Aram Shah. Its short but has everything you need to know
I have noticed that many companies simply take advantage of their 100% employees. In today’s terrible economy (disregard what you hear in the media) there are many talented sales professionals looking for a reliable source of income. The 100% commission employers are not doing any favors by hiring on their terms. If their products were in demand they wouldn’t have such high turnovers.
I’ve been seeking descent employment online and it has been a frustrating ordeal. I notice the same jobs posted over and over. this tells me that a sales rep can’t make a good income selling this product. Any hurting business can hire an unlimited number of 100# commission folks with no increase in overhead. Let’s face it…today’s economy is terrible for most industries and it will; not improve until, at the earliest, after the election. Even then we are at the mercy of government regulations and we can only hope these regulations are greatly eased to allow businesses to flourish. We all know that government knows absolutely nothing about running a profitable enterprise. I’m keeping my fingers crossed.
A great book on the topic is “100% commission and death of the big box realty” by Aram Shah. Its short but has everything you need to know for real estate professionals.
Offering a 100% commission sales position isnt so bad if your company have the essentails to help the sells executive achieve higher ground. Inotherwords the company should offer a great product/service, have a short sales cycle, excellent customer service department, paid training, straight forward pay format (No Games), and furthermore the company shuld offer upward mobility…, some type of carrot to keep the sales executive(s) hungry. This might be a promise in writing to award the sales executive an opportunity to manage several sales agents, have their own office sort of like a licensee or franchisee deal or etc. After all rather you are paid a salary, a wage, a draw, a commission of a salary + commission; you are always working a 100% commission job. If you don’t perform you will not get paid on the next pay period. You will be FIRED! Think about it… we are always working on 100% commission.
Here is the truth today. You can be a GREAT sales person. Essentially people buy from people and you are the reason that people buy. That being said, I could sell policies but our CS call ctr was LOUSY. I’m talking antagonistic mean, nasty, ugly, why are you bothering me attitude . Hiring complete idiots because it was minimum wage so you aren’t getting quality employees. So then your buyer thinks you snowed them, and they tell others and try selling when you don’t have ANY support after the sale. But companies will NOT change this. They outsource to god knows where and it SUCKS for the customer. So great sales people can’t make it when they sell a product that has NO integrity. 99.9% of Americans do NOT want to talk to India, or any other foreign country when they need assistance. But companies DO NOT care. I had people get SO mad that they couldn’t have ME help with their customer service. I wasn’t PAID to do customer service because time was $$$ for me being commission only. That is too much stress without ANY monetary compensation. If customer’s cancel within a certain time frame you get NOTHING. Who can LIVE on NOTHING?