Who here has successfully built and scaled a commission-only / rev-share sales teams for SaaS and retainer-based business models?
What are the do's and don'ts of this approach?
Heres the short answer that you will need no matter what you are selling or at what stage. Search for reps that have experience mind the field you are entering. Have a great product (this is non-negotiable, people say all the time that you should launch early with a half ass product and it’s bull**** if customers are paying, you can launch half ass product if they are not) do what you say you will do. And finally offer them a decent commission that sunsets After a certain period of time. No forever commissions if it is recurring revenue.
Robin has offered some detailed examples of how the limited number of salespeople willing to work for commission-only are typically operating. But I think your question is more about how to find them in the first place, not how to negotiate with them.
The willingness to accept commission over salary generally has to do with the amount of risk involved. The typical reason an owner is trying to shift the risk to the salesperson is that you don't have cash on hand to pay them salary while sales volumes are low. This is usually a completely unacceptable risk level because it is not a proven sales process and all the burden is on the salesperson.
The time to consider commission-only is only after you have perfected your sales process and build a reliable leads funnel. This is never at the start of a new enterprise when you have no track record. I'm focusing here on C & D notes from Robin, because none of the other things Robin has noted in his list matter until these two elements are rock-solid.
One thing not previously mentioned is that your margins must be very high on a product you sell commission-only, because typical agents working under that scheme are going to expect something in the neighborhood of 50% commission for the amount of risk they're taking.
On the bright side, if you have the same definition as other people do about a revenue-sharing model for salespeople, you ought to be able to hire a sales team on salary (living wage) and offer them a revenue-share as incentive to refine and perfect the sales process. But these salespeople are still going to require a very high degree of faith in you for the quality of your product, your marketing efforts to drive lead generation, and your ability to deliver on promises.
Remember that any outsourced sales team will always under-perform an in-house sales team, no bones about it. They simply don't have the same stake in the outcome. And it's not always about the money for salespeople (though it's a large part of it). A good salesperson needs to feel connected to the thing they're selling, not just be an adept salesperson.
The owner of the company is usually its first salesperson. Although it might not be your title, you are the one setting the standard for how you talk about your product, how you interact with potential customers, and the one able to negotiate when some adjustments are needed in process, price, or something else. You also have the greatest depth of knowledge as to what your product is, why it exists, and how it works. It is therefore your job as owner to be the leader in perfecting the sales process until you're ready to turn it over to someone else whom you have trained to step in.
As Robin points out, this may take years of history for your company before you can actually build an effective/desirable commission-only sales team. It's certainly not a model for everyone, though the idea is (mistakenly) popular with business owners who don't have cash in the bank.
Using commission-only sales teams is only a good idea if:
a) you have a high quality, high value product/service SaaS/Retainer offering, not a "me too" alternative to a dozen other similar options
b) you have access to a database of quality commission-only sales professionals
c) you have a company that is (ideally) at least 3 years old and is financially stable enough to stay around for at least the next two years
d) you have a well defined and proven sales process already designed, documented and tested, with quality sales collateral resources
e) you have paying clients already that are happy with your solution
f) you have the intention to pay high commissions and are not looking to nickel and dime the reps with 10% commissions
g) you have the intention to pay residual commission on any ongoing payments from the client, not just their first payment, as well as on any new product/service offering the client subsequently signs up for with or without being led to by the sales rep
g) you have a relatively short sales cycle (few weeks to 3 months is ideal)
h) you have a selling price that makes it worth the agent's time ($500/m r $5K/y and up (no comm-only rep wants to sell a $99/m SaaS subscription when the same time investment is required as it takes to sell a $700/m subscription
i) you have the intention to pay out commissions within 7 days of receiving cleared payment from the clients they close
j) you have a marketing budget to support the agents in the field with "presence/visibility"
k) you have a competent sales manager to manage your relationship with a team of independent, commission-only sales agents
l) you have the intention AND ABILITY to supply qualified leads to the sales agents
m) you have a high quality CRM system for managing commission-only sales teams and are not bolting together a handful of applications hoping they will get the job done
n) you have a solid commission-only sales agent agreement that's properly structured to secure the agent's best interests, not some amateur "appointment letter"
o) you have every intention to deliver the promised value to the clients your sales agents bring to your company and intent to provide them with stellar ongoing support
p) you have the perspective that commission-only sales agents are your company's strategic partners, not some sub-set of employee that is a rung below salaried in-house sales reps. Commission-only sales agents are the equivalent of non-equity INVESTORS in your company; they invest their TIME, their REPUTATIONS, their well established C-Level CONTACTS and their MONEY to represent your company without any safety net or guaranteed ROI; they get no shares in your company or voting rights for making such a major, high risk investment in your company.
The best commission-only sales agents, therefore, are priceless... saving you $60K+ a year in salary plus benefits and allowances, yet often delivering more sales of a higher value than your "comfortable" in-house sales reps, so when you get a high quality commission-only sales agent to invest in your company, treat them as the priceless assets they are and don't even think of dismissing them because "they're earning too much money with your business".
FACT - Many great commission-only sales agents are business owners who happen to love selling and thus work as commission-only sales agents "on the side" to maximize the value of their professional network, and to expand their network and sphere of influence... like myself, for example. We are very selective about who we will work for, so don't jump into commission-only sales until you know you can honestly check the vast majority of the above boxes. It's worth it to wait until your company is truly ready.
If you can indeed "check the box" for all or 90% of the above, your company is an excellent candidate for successfully working with quality commission-only sales agents. If your company is an excellent candidate by the above criteria but you don't know how to find quality commission-only sales agents quickly without wasting weeks or months and thousands of dollars on job ads hoping to get quality responses, I suggest you PM me here on CFL and I'll help you out with that. If you only meet 70% of the criteria, I may be able to help you make up the difference in short order depending on where the deficiency is, with the application of some strategic business model engineering.
In my opinion, every tech startup should implement a focused plan to become an ideal candidate for working with quality commission-only sales agents as soon as possible... as early as 1 year in, if they work really hard to get a quality solution into the hands of early adopter B2B clients of significance, through exceptional value propositions and tenacity.