I’ve often heard business leaders say, “Let’s hire reps at 100% commission. If they don’t work out, we’ll replace them and they haven’t cost us a penny.” Even at 100% commission, bringing new sales reps into a company involves expensive “hidden” costs:
Straight commission can provide tremendous motivation for sales reps who generate sufficient cash flow to meet their basic personal needs. However, sales reps who have not yet established their territories and are struggling to make ends meet can quickly become disillusioned. If your sales cycle is longer than a month or two, dissatisfied reps may leave for new job opportunities. Then your investment in that “no cost” sales representative is lost. Customer satisfaction may also decrease as customers perceive higher turnover within your sales team. Finally, the sales rep you spent time and money training may take your investment and go work for your competitor.
Base salaries compensate your sales reps for spending time on non-sales activities that benefit your company. A base salary also helps sales reps meet basic living expenses so they can focus on your customers’ needs rather than their own. If you are determined to put your sales reps on a highly leveraged commission plan, consider paying your reps a draw against commissions during a reasonable period while they establish and ramp up sales in their territory.
Wallace Management Group Can Help
At Wallace Management Group, we’ll help you design and implement sales commissions plans based on your company’s goals and strategic plan. We’ve written sales compensation plans for small, medium and large companies in industries ranging from technology to manufacturing, industrial services, distribution and logistics. Learn more at wallacemanagment.com.
We’d like to help you achieve your sales and marketing goals. Contact us at (203) 856-9400 or firstname.lastname@example.org to discuss how we can help you drive more business.