Question on 100% Commission Plans

We recently responded to the following question on Linkedin:

Sure seems like nobody wants to work for commission only anymore.. selling software … Anybody know why? Its a job.

Great question and I agree with the other posters here – this is a rough economy and people know that in many companies, the sales aren’t going to come easy or often.

That said, there are many sectors where 100% commission is the tradition and in this economy many employers feel they have leverage in offering full commission positions.

It looks good on paper and you can certainly find people to work for 100% commission, but there are some caveats, especially if it is not the norm in your sector to pay 100% commission:

- offering a salary, even a below market salary, implies a company has some degree of staying power
- offering a salary helps share the investment required for a new hire to learn about your business (a salary is and should be below the target income that a rep wants to make to create incentive, so the new hire is not making what they want while they learn your business – they are investing as much as the company)
- offering a salary demonstrates commitment to the new hire
- candidates who have options will place a lower value on a company offering no base salary – it is an emotional reaction, not always logical
- Anyone who can get a position with salary will likely go for it, so even if you hire someone on full commission, they may end up taking the position because they need a job, but continue to search for a better position
- you will not be able to hire the top performers in the industry or the best qualified unless all of your competitors pay no base salary and you are hiring from within the industry (…and building a team of B or C players and other company’s castoffs, is absolute suicide for the sales leader/owner – messed up leads, pissed off customers, higher turnover, wasted management and training time..and on)

If paying 100% commission is not the norm in your industry, you can still find great people who will work for 100% commission – there is a certain type who are convinced they can sell your prodct, will be attracted to a highly leveraged comp and will take the risk – it just may take you a very very long time to find that special person and in the meantime, you are passing up good profitable sales that would otherwise have been won by your company.

Sometimes paying a small base salary can make a world of difference in terms of finding a productive sales professional in a decent timeframe…and then you can focus on building your sales instead of hiring.

Good luck,

Eliot.