Sales · Strategic Human Capital Manageme

100% Commission vs Base

LeVar Berry Inventor of the eDriven brand name

September 10th, 2019

When hiring sales people in a new start-up that is unfounded... what attracts the most people?

Paul Garcia marketing exec & business coach

September 10th, 2019

There is no time when 100% commission is a substitute for the problem of not being able to pay your salespeople some kind of base salary. The only time that arrangement works is when your sales organization is very mature, meaning you've figured out and refined the sales process to perfection and know exactly what it will take to generate how much sales in which circumstances.


In a startup, that's not the situation. You can't start with salespeople who are 100% commission because that's asking them to take all the risk. Phooey, is what any salesperson who is any good would say to that risk burden.


That said, you won't even attract moderately good salespeople if you don't figure out your sales process before you hire them. You as the founder are the primary salesperson, no matter what your other duties are, until the day when your sales process doesn't need any more adjustments. Then you can turn over the management of sales to someone else. But until then, you are on the hook to figure out what factors contribute to sales success, sales failures, loyalty, reasonable costs of acquisition, the shortest time to closing a deal, how leads are generated reliably, how leads become qualified, what collateral and marketing support makes the sales engine work, etcetera.


What attracts salespeople to work is a company that has figured out its sales process with such detail that they could almost be trained monkeys and succeed.


Remember that salespeople will always perform in the manner in which they are incentivized. More sales is not always the answer. Be specific. Do you want customers who pay up-front, who make decisions quickly, who need a lot of support, who buy over and over again, who are good at referring other customers, who are willing to share their stories, and so on. Most salespeople are relatively blind to the financial and operations departments of the company. They don't know if the bills are getting paid late, if the customers are expensive to maintain, or other things.


You as the founder need to be the model salesperson. No one will know more about your company, your needs, your abilities, and your ideal customer than you. And even if you don't like sales, you're it until you perfect your process and can turn it over.

Jeffrey Hill CEO at Remote Home Check. Solver of problems, technology visionary, and a transhumanist at heart.

September 13th, 2019

I disagree. You can absolutely find salespeople who work on “commission.” First off, there are more ways to compensate someone aside from commission and a base salary. I have built a team and raised capital with said team and all 4 of them including my sales leader are all in. Why? First and foremost, passion. Any really smart salesperson knows that startups are where innovation often times happen. They have the most upside, thus if you can negotiate milestones in exchange for a future small equity stake and a nice commission structure, you can attract very talented people. I was also a salesperson for 12 years... I still am in many ways!

Brendan LaCorte Sales and Marketing founder working on a startup now looking for an experienced web developer.

September 12th, 2019

I'm in sales. The opportunity to make money. You want someone who cares about your product so that resonates with your customers but, most good sales people are going to be driven by selling with each sale making them more money.


Set up incentives to help them make money for your company and for themselves so they keep selling.


Create a process of how the sales process should work and look and most good sales people will just repeat that process over and over as long as it works which will make both of you money.


You should understand the entire sales process from generating leads, to customer validation, to closing.


Brendan



Satish Varma Srivatsavaya Founder and CEO of Clorder, Co-Founder of B3Comm, 12+yrs experience in Mobile Tech, Kellogg alum

September 10th, 2019

LeVar,

We are grappling with this situation for few years. Here are my insights, in the context of an early stage startup:


1. Though commission is a very attractive part of compensation, most sales people prefer, or expect, to receive a base pay.

2. The challenge with low base pay, is that if the sales person doesn't meet a required quota to receive a commission, then he/she will start to panic and under-perform due to insecurity in the overall take-home pay.

3. On the other hand, with a high base and less commission, the sales person may not be highly motivated to meet quota and receive commissions becuse the base is guaranteed.

4. Adding a bonus when a monthly quota is met is an incentive that helped a bit, but didn't really sustain after few months.


I think the following factors matter in the overall sales operation:

1. Having a well structured training and support system for the sales people.

2. Good marketing collateral that assists the sales person's pitch to prospects.

3. Inbound activity to collaborate and generate leads so that sales team can focus more on selling.


Am curious to see what others have to say on this topic.


Cheers,

~Satish

Dane Madsen Organizational and Operational Strategy Consultant

September 10th, 2019

If you have anyone agree to 100% commission for a startup, do not hire them. They will not be good at the role.


This subject has been discussed in this forum many, many times so not only should you read the past discussions, @Paul captures the elements perfectly.



David M

September 11th, 2019

This question does not have an absolute answer and you have not provided enough information to properly evaluate. 100% commission at what % of the sale? VS...base + commission and what % of the sale? I am friends with a career salesperson who wont work for base because he is simply that good. His negotiating angle is he wants 100% commission because in exchange for taking that risk he takes a higher % of the sale. And in so doing, he makes far more than than the compensation with a base salary pays. He takes the risk off the company and sells his risk for a higher%. Is that the norm? Probably not. And with that said, that is only with larger companies. Would he do it with a startup?...depends on how much the person believed he could sell.


And will that salesperson stay around with your company to build it...?...depends on other incentives. A lot will depend on what you are offering. If someone believes they have the connections and you have the product and they can turn the sale quickly...why would they want to be limited by a compensation that reduces commission because it is providing a base salary?


I can tell you though if you are offering 100% commission you better be prepared to pay considerably higher rate on the sale.


My bigger concern with a 100% commission for a startup is finding someone who is not going to be wreckless and potentially damage your company. If you are not paying them a base, they won't see you as the CEO so all bets are off.

Ryan Farber I'm an individual looking to build some cool stuff

September 13th, 2019

Such a great topic!


As the comments suggest it is a question that will be forever faced with duality.


From my sales experience what best attracts sales people is $$$! You could argue that there are people who sell for passionate, or they are good at, etc. But in reality sales is based of money.


My experience is I'll jump on commission only if I see actual numbers of what the current sales people are generating. I'll also jump as Jeffery mentioned with incentivizing me not only short term but long term as well.


If the pay is commission only with no results, no real product, or no real leads then I become skeptical.


The best way to test this is put yourself on a commission only structure and see if you survive, that is always a great testament to your ability to do anything for the company to succeed!


Thanks again for starting this conversation it sparked some really great advice and comments!