Salesforce · Marketing

How to build a commission based sales team?

Evan Levy

March 9th, 2015

My company is quickly growing and I am in need of a sales representative, but am not at the point where I can pay someone to work full-time. I am looking for resources and advice on how to go about hiring a commission bases sales representative.
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Mahmoud Elsaid Entrepreneur-LamasaTech MD for Signage,Touch Screen & Kiosk Solutions-Technology Innovation/Business Strategy Consultant

March 9th, 2015

I tried that in several companies I ran and it just doesn't work out as they aren't invested enough to build a pipeline and close it. Try to build up a network of affiliates or resellers. That works our better as they have the same customer you need already and they'd get commission for selling on your product . That's my personal experience.

Sati Hillyer Looking to Hire a Ruby Engineer to join OneMob - 2015 Gartner Cool Vendor for CRM Sales

March 9th, 2015

I use this:
http://www.saastr.com/a-framework-and-some-ideas-for-your-first-sales-comp-plan/

But one thing I learned from VP of Sales at RelateIQ (Armando Mann) - make sure these initial hires are just as passionate about the vision as you are. You don't want them only focused on comp otherwise they may sacrifice company principal for their commission check.

Anonymous

March 9th, 2015

My team helps companies in your situation. We act as the sales and business development team for startups - until they are ready to build an internal team. I can send you more information by email.

Jessica Magoch Sales doesn't have to be a dirty word. Get more clients without being icky, sleazy, or just plain annoying.

March 12th, 2015

Hi Evan, 
I can truly say this is my area of expertise. We build commission - only sales teams for startups and have been building them collectively for 30 years with many successful exits.
A commission only plan is a completely different structure than a Base + Commission plan.  There are many advantages to being a commission only sales person, so make sure you satisfy the following: (this is a short list)
  1. A commission only person should have the opportunity to earn more than a base + commission rep (they are taking on more risk), and have lifetime ownership of the accounts she brings in
  2. A commission only rep should be compensated partly in equity after reaching certain performance and vesting requirements (as you would with any person working for free on your team)
  3. A commission only rep has the flexibility to create his own schedule, work remotely and have unlimited personal and sick days
  4. A commission only rep needs a world class leadership team to motivate and inspire her on a daily basis
  5. A commission only rep needs to sell a product that changes lives, not just makes money.
We developed a proprietary algorithm that helps us calculate competitive compensation plans for commission only teams, taking into consideration the above as well as many other factors.  I'd be happy to run your company's numbers through it to give some recommendations.  We're also piloting a recruiting software that specifically evaluates sales people and looking for beta testers. 
You can reach me through LinkedIn. 
Have a good one!
Jess

Evan Levy

March 9th, 2015

Wow, first thanks everyone for your response. I've only been on FounderDating for a few days and am overwhelmed by its benefit. I'm going to try and answer as many questions as I can, let me know if I am leaving anything out.

What is the product?
The service that iProperty Tours (ipropertytours.com) provides is virtual tours of real estate properties (mostly commercial). We offer a few different options in terms of tours. One of them is completely virtual and does not require us to go to the property, the other is a video tour, which requires one of our videographers to go to the property and film. I work with a team of videographers throughout the county who are familiar with our process. 

Who are your clients?
The majority of our clients are large commercial real estate brokers throughout the country. All of our sales at the moment come from direct marketing and referrals. 

What would the sales representative be responsible for?
The sales rep that I am looking for would be responsible for calling commercial real estate brokers, procuring new business, and seeing the sale through to the end. The sales rep would be trained on how to sell the product and the entire process. They would also be provided with all marketing material needed to make a sale (brochures, video examples, etc.) 

What is the commission structure?
The commission structure that I have set up at the moment allows for up to 22% commission on a sale. The average sale being around $1,100. This would also go for all additional sales from that customer (the average customer purchases around 7 videos per year). I know paying fully on commission is not ideal, but I am still trying to perfect the sales process, and since this is my first full time employee, I would prefer to start out on a trial basis for someone, and see what works and what doesn't. This also allows the sales rep to decide if we are a good fit. 

Who is your ideal candidate?
I am looking for someone who is passionate about sales and somewhat knowledgeable about commercial real estate. One of my best attributes while selling is I am a former commercial real estate investment broker. When I talk to a client I know the real estate, and know what they are looking for, so they can trust that I am going to provide them with a great service, and I wont need much guidance. 

Let me know if there is any information I left out, thanks everyone for your help!

Evan Levy

Travis Russi

March 10th, 2015

All things being equal, sales people care about one thing: money.  The more they make, the happier they are.

Start with the lifestyle you want your sales team to live.  Think size of house, neighborhood, type of car, type of vacations.  Then work backwards to figure out the monthly income to cover that.

Get one salesperson to hit that number and everything else falls in line.  They tell their friends how much money they're making.  You can show each prospective hire the salesperson's car parked in the parking lot.

Success breads success.

One tactical note: Understand the difference between sales and marketing. Everything up until there's a person on the phone who's interested in the product/service is marketing; it's not the salesperson's job to do marketing.  Read 'Predictable Revenue' to better understand how to position your salespeople for success.

In order to get that salesperson to hit that number, you need to have a very proven sales process in place, preferably one that does not require the salesperson to do any outbound sales (i.e. cold calls).

Rob G

March 10th, 2015

Evan, this is a big subject and it's hard to do it justice here. As Pete suggested, find yourself an advisor with deep experience building sales teams because this isn't a one-time conversation. This is an on-going conversation that is critical to your company's future.   Among other things, you need to figure out direct sales VS reseller (i would NOT recommend going with resellers this early as you need to be intimately involved in the sales process), what type of sales person you need for your first hire (inside VS outside - your price point and LTV suggest inside), then you need to find them, recruit them, evaluate them, hire them, train them (given your pricing and LTV this will be a challenge), manage them and design a comp plan that will encourage the activities and results you want and discourage the activities you don't want.  all of that is not going to happen on this thread.  With a commission only plan you should consider equity as part of the overall comp plan as an incentive to attract the very highest quality talent.  Also consider baking into your plan the addition of a salary connected to some performance milestones.  You really need to pay attention to and get creative with your comp plan as your pricing and LTV present some challenges to attracting high-calibre sales people, but you don't want to turn things over to a reseller yet either. Some simple math tells me this person will need to close about 2 deals/wk assuming 1 sale generates $7.8k/yr/deal. Depending on the infrastructure you have in place (marketing, lead gen, CRM tools, prospecting Db, etc.), competitive landscape, your competitive advantage, referenceable customers,  and a bunch of additional variables this sounds like a fairly high-volume inside sales position.  I'm curious though, if your typical prospects are "large commercial real estate brokers" why your pricing is so modest.  I would really take a hard look to see If there is a way to boost your transaction price and LTV by several X.  $1,100/sale needs to be more of an inbound, 'self-serve' or low-touch transaction.  Your out-bound efforts would be better utilized on transactions in the $20k+ range or better yet, $200k+.  

Peter Kestenbaum Advisor, Investor, Mentor to Emerging firms

March 10th, 2015

These are all valid... but as I stated previously get an advisor or coach...   I teach entrepreneruship.  One of the major points we try to instill in young entrepreneurs is stop going it alone.. get yourself two or three advisors who complement the skills you do not have... ( If you are a coder or product guy get a bus dev/marketing coach--  if you are a concept guy get a technical coach if you are going the on line route )..  Many of the discussions I see on this forum just should not be happening if the founder was surrounded with the right person....    Advisors are 1/2-3/4 percent people vested over 4 years,  terminable if things do not work out and in most cases will accept a cliff (no vesting for 3 or 6 months ) so they cost you nothing if you do not get value.

Just a recommendation...

Brian Wrye Creative Director at Sales Team

March 9th, 2015

What is the product, or products? Where do you live? What market share do you have in said product, or service and what percent do you want to gain? Are you selling locally, regionally, or nationally? How many on staff now? What sales materials do you have in place? What is the value proposition? What is working for you? What is not working for you? Who is your target market? How are you reaching them now? What's your approach? What percent of sales calls do you close, per every 10 customers called upon? What length is the sales cycle? What is cash flow like? What are your margins? What percent of sale would you offer as commission? How long would you provide commission on a sale? One time only, or over a period of time? How many sales people do you want/need now? How many do you want to have and would they be selling locally, regionally, or nationally? Do you reimburse for expenses, such as mileage? Do you have a presentation that can be customized per customer? If you want, answers these then I'll either come back with some added questions, or direct thoughts? Sincerely, Brian C. Wrye

Jack Greene

March 9th, 2015

Hi Evan,  As Peter and a few others who commented before him, there's more that we would need to know before suggesting one plan over another.  Questions such as,  is the business repeatable and will the sales person continue to receive commissions on renewal business.  Ultimately, a straight commission plan suggests that the salesman assumes all of the risks.  At the same time if you are not providing any compensation besides a commission, you really loose all control over their work behavior.    Happy to offer suggestions, but need to know more about you, your company, product/service, price point, etc.

Best wishes,
Jack