Business Development · Business Strategy

Why pay sales team prior to results?

Sumeet Jadhav Founder @ Code Factree

Last updated on September 22nd, 2017

Finding a proper Sales COmapny is very important for any company, but the thing that troubles me is they asked me to pay a huge amount at start to get results after some months.


I can understand that to generate Sales, they also have to do lots of work. But as per my view, why should a company pay before any results?


With our tech business we get payment after showing results; we also have to work a lot, use resources to create the product, etc.


So why can't this rule be applied for sales companies or sales teams?


What if we were to increase the percentage, but charge us after showing the results?

Paul Garcia President at TABLE

September 20th, 2017

There's not enough information to assess why your sales team is not generating sales. While you can certainly hire a sales team that is commission-only, the cost of shifting that risk to the salesperson is a gigantic commission compared to the usual base + commission pay structure. Your salespeople have to eat, pay rent, put gas in the car, and pay utilities. If you're asking them to wait until there are sales before they get paid, the cost of shifting that risk is high, think at least 50% of sales. When you pay a base salary + commission, depending on the industry, instead of 50%, you'll be paying more like 15-20% commission on sales.


No matter what your compensation model is, your salespeople may still fail to generate sales. If it happens, it's your fault. Salespeople need continuous training and supervision, they need leads, they need marketing support, they need a product that has value, they need collateral materials to leave behind and use in presentations, they need a sense of ownership for the outcome of their efforts, they need a company web site that gives prospects confidence the company is trustworthy, and most importantly they need to be able to speak about the product persuasively and authentically.


If your salespeople are not supported with the things they need to succeed, you could feed them all the leads in the world and they would fail. Salespeople need coaching, they need to love the product as much as you do, and they need to feel invested in the success of the company with something other than promised commissions.


The way you've described the sales people is as if they are an outside sales force that you hired to go sell your product. This is a very weak model. What are you doing to improve sales performance? What have you learned from listening to their sales calls or accompanying them on sales visits? How do prospective customers react to your sales collateral, to your web site, to the pitch being made? What are the objections to purchases? How much effort does it take for any of your competitors to win a customer? What are they doing differently? Where do they get their leads? What is your competitors' marketing strategy? What are some of their sales tactics? Are you doing the same things? Are you better or worse at those things than your competitors?


It's not about the compensation model for your salespeople, it's about analyzing the total situation and getting directly involved in improving the interactions. There are three things that persuade a person to make a purchase. 1) personal benefit, 2) dramatic difference, and 3) reason to believe.


1) this is benefits, not features, specific to the individual being sold, not bigger than that

2) dramatic is not 20%, dramatic is 50%+ different

3) why should anyone trust your product


Usually people get the third one, but rarely do very well on the first two.

Anonymous

September 18th, 2017

Its a basic quiestion , sales team brings in the money and rest of them uses the money. If you dont spend on sales team your high paid development team is left high and dry.


When you dont have a requirement what will you work on. Hence sales team are paid highest in a company that needs to sell something in competitive market.

Refer to pay-scale for Google, Microsoft and Facebook. If you were right they dont need a sales team.

Bryan Frank

September 21st, 2017

Before I explain what sales people do, I wonder what employees you've found who are willing to work for no pay until the product is delivered. Every engineer I've ever hired demands high pay and equ pay before they'll even start writing a line of code.


Now, on sales: sales teams, particularly at early-stage ventures, are typically charged with identifying prospects, reaching out and educating potential customers, negotiating deals, and post-sales follow up---unless you have a strong customer success team in place. (Check out this handy little explanation of the sales cycle here: https://www.pipedrive.com/en/resources/sales-cycle-management)


Even for the best sales people, the sales cycle can take many months before a deal closes. so a good executive leader tries to balance risk/reward by mixing base pay (what you pay to have ambassadors out in the field) with commission (reward for making sales). Your best sales people can even help you find that right balance over time, based on the strength of your product offering and the market reaction.



Mike Duquet Director, CRO @Strawhouse, Former Web Optimization Lead @Hootsuite Enterprise, Lynda.com author

September 21st, 2017

Maybe I'm misunderstanding the Question, but do you mean "investing" in the Sales team, or straight up "paying them? Before results?


What I would say is I can understand not putting down significant investment to build up a Sales team, create better processes, etc. until they hit initial levels.


If you're trying to say "I don't want to pay my Sales people before they make sales" then well, you're a d*ck. People need to eat, people have families - and having someone think that if they don't sell they'll starve? Yeah, this is tech man, this ain't an 18th century rivet factory, cmon.


How about try this - treat every single person who works with, or for, you with respect and encourage them. In my experience the best salespeople believe in the company and management and will bust their butts to sell as long as they're treated with respect.

Ian McCloy Founding Principal of Africa Strategies Network

September 20th, 2017

Organisations offering Sales Services will need to invest a certain amount of time and money understanding exactly what product or service you are offering. An upfront (commitment) fee is generally to cover these costs in case you cancel the agreement before any revenue is generated.

Sumeet Jadhav Founder @ Code Factree

September 18th, 2017

@Anonymous,

See I totally agrees with you, But my question is why to pay first, means why not bring us the business and take the money.

If you create an application you don't pay 100% at first ; you will pay only after seeing the application..right?

SO why cant sales company work on this module.. why to pay first.. bring us the business and take the payment

And also I am agreeing to pay more but after getting result

Raymond Williams Software Developer at Vista Entertainment Solutions USA

September 18th, 2017

" See I totally agrees with you, But my question is why to pay first, means why not bring us the business and take the money. "


You pay first because you need the service. If they came to you asking for your business, then you would have some negotiating power to form an agreement you're more comfortable with. Otherwise, you pay the rate of the company you're buying a service from.


" If you create an application you don't pay 100% at first ; you will pay only after seeing the application..right? "


It depends. You most definitely pay something to get the development started, typically xx% of the project estimate. You'll have a very hard time finding a credible development partner willing to develop anything for you prior to receiving some amount of payment.


It sounds more like you're in a situation where you do not know how to generate sales, outsourced the sales, and are not satisfied because you're not getting the results you feel you should have in this amount of time. I would question that logic given that you've outsourced the task to someone/thing more capable of performing the task.


A common framework for this would be:


- Outline of expected results with time frame

- Estimated project cost (fees + advertising expenses)

- Retainer given to the sales partner

- $X amount in fees paid to partner on a scheduled basis

- X% of revenue paid to sales team


Many firms will want to be paid a fixed price for management of sales campaigns and not receive a percentage of sales. They have no control over your websites performance and would be taking a risk by counting on sales percentages. It is much more lucrative to simply charge an economical management fee, make your clients lots of money, and apply those winning sales strategies to as many clients as possible.


Why won't sales teams work on a percentage based results model for your service? Because your service is too risky and will probably fail.




David M

September 21st, 2017

I think you approach it from the generous standpoint. If your company is not established it will be difficult to get anyone to do full commission unless the sales are big. If I am going into a company with a product that I can place with a major company and turn into $10-50M in sales, that 100% commission is worth far more than an upper 5 figure base salary, or low six figure plus commission. I actually know sales guys who will NOT work on base salary and only 100% commission because they know they can make fare more.


But if you are asking someone to do 100% commission and the sell is 1, 2, 5 k here and there...that could be difficult to entice quality candidates.


BUT I can also tell you I have told some CEO's I will work on 100% commission and connect their company to billion dollar firms which amount to potential $5-10M accounts...and I hear crickets..which is amazing. So I commend you for being willing to pay a higher commission at 100%. You just need to figure out what that number is...and I would say its probably in the 30% range.

David M

September 22nd, 2017

@Chris Kimeara makes a great point to consider! Part of the attraction for the mentality who likes 100% commission will be more of a "You are not my boss because you do not pay me. I am free to get the sale however I want within understood professional guidelines."


Certainly some of the employment agreements can cover points because you want sales tactics to be professional. But someone on 100% commission likely is going to want to work on their time in their space. If it were me....and Im just saying because I have done such business development deals (not strictly sales) I view it as more of a collaboration. While I certainly respect any CEO of a company I work with, if there is no base salary, the CEO is not my boss in the sense..there has to be significant freedom to move at my own discretion. So in the contract agreement you would need to have an ethics code and guideline section or something there of, aspects of non compete, probably a "While you are free to pursue your own contacts, you must receive prior approval to make sure the company is not in current discussions or dealings with them."


The bigger issue, and I don't interpret this based on your wording...is ego. If a 100% contract player brings in bigger potential accounts than you have, you better make certain you keep your ego at the door and be thankful you found someone more capable than you (which is what a true leader as opposed to an insecure one is constantly striving for) And the mature professional will point all the spotlight to the CEO while remaining the rightful point of contact.


So to Chris's point...you dont want to just give someone free reign in any way that could damage your company.

Chris Kimera Enthusiastic; Passionate and always Obsessed

September 18th, 2017

Some companies have sale some people that are only paid on commission (no money upfront)


But the problem with this is that you won't have much control over your sales people or how they represent your brand.

And you're very unlikely to find quality sales people that work without commission


The other option is to pay a small base salary followed by a commission plan


That way