Should You Consider Commission-Only Salespeople?

Each executive understands what’s best for their unique market and business, but it’s hard to imagine a situation in which I would hire commission-only salespeople. Creating an environment of success is critical to help your people succeed, and ‘commission-only’ doesn’t demonstrate commitment by the sales leadership or the company that they’re really there and incented to help their salespeople succeed.

Pros:
* “Reduced risk” in hiring (there are still time and opportunity costs)
* Salepeople are highly incented to close business

Cons:
* The company will attract inexperienced salespeople that can’t get better jobs.
* Commission-only increases the motivation to “do wrong” to close a sale. You do not want desperate salespeople representing your company. They will increase your liability, decrease your customer success and satisfaction, and wreck your culture and morale.
* Erratic compensation and lack reliable income means your salespeople have more financial problems, ironically distracting them from work goals.

If you have a ‘churn and burn’ culture that sells commoditized product, perhaps commission-only sales is a way to go. If you want to build a solution-selling, high-value sales force, commit the team and company to invest in their success just as much as you expect them to invest in the company!

[Updated]Excerpt from Peak Sales Recruiting Post

Peak Sales Recruiting put out a great note on when 100% commission can work…

In this economy, many companies are looking to cut costs or gain an edge and we are sometimes asked for comments on how to successfully hire sales reps with 100% commission compensation plans. The short answer is it is very difficult and only works in certain situations:

• If your company is well known and there is lineup of candidates who want to work for you
• There is an established history of sales success and reps earning at or above market rates
• Entry level or untrained sales people can be successful in the role
• 100% commission plans are the norm in your industry
• You can wait a longer time to find the right person
• You can tolerate higher than average turnover on your sales team

Otherwise you may have trouble attracting competent and reliable sales performers to your team even in this economy (the best reps are still gainfully employed).

We provide more detailed comments and insight on this topic on our blog at 100% Commission Plans.