"Why I Choose To Be Paid Strictly On Commission"

What would be a reasonable commission percentage in the real world life of an experienced security/integrator salesperson?   How does this affect selling expenses like auto, mileage, entertainment, etc?  Also, is it always assumed that health insurance coverage is included up front no matter what?

So, in a real example .. say the integrator salesperson brings in 1 million in work at 30% gross margin (300K profit inclusive of all materials and labor; exclusive of the salesperson's commission and net profit for the company) ... what would the salesperson earn in commissions?

How about $2 million?

This post is apart of a short book I am writing on why young people should pursue a career in professional sales. I will be interested to see what people have to say on IPVM. Commission only is not for everyone. It's only for a particular kind of personality.

I find this kind of pitch to 'take charge of your paycheck' to be slightly disingenuous - at least starting out in the physical security industry.  It mirrors what is commonly heard at Amway conventions.  The motivation=$$ method.

Going from a guaranteed $10/hr - and earning $20/hr after commissions are applied sounds great, and is great from the perspective of an 18 yr old.

The sought after employee for these types of firms throws as much crap at the walls as they can (the more calls made, the higher number [if not %] of closes). 18 yr olds and other 'non-provider' types are heavily represented in the mix of these companies employees because they can make at least twice what they can make at any other non-skilled position... like convenience store and fast food work, stocking shelves at K-Mart, etc.  Glib conversationalists prosper... they are not attempting to build relationships.

Straight commission jobs (from the beginning of the job) are generally relegated to the fringes of selling.  i.e. vinyl siding, replacement windows, home waterproofing, cleaning products, etc.

B2C, not B2B.  The B2B sales process requires more than what is required of B2C.

To earn a living (providing for family, etc) hardly anyone could afford to take a straight commission job in physical security because it takes years sometimes to build the necessary relationships with which to survive upon a percentage of your individual sales.

This is why I think that most sales compensation packages in our industry include a mix of base + commission.  To incentivize continued success, I think the base should shrink over time to - at some point - go to straight commission.

When I was 18 I got a job at American Eagle, they offered me $5.15/hour. At the time gas was over $4/gallon...

John, are you sure about that simultaneity?

I resisted taking a commission job for the longest time, preferring the safety of a salary. I recently got a commission based job and I am loving it. The idea of getting paid more for working harder is appealing to me, not because I love money but because it's solid proof that I'm doing a good job. 

However, I got a bunch of kids at home. I need to know that some money is coming in while my deals are cooking. So I need a base salary that will cover my grocery bills at least. 

If I was single, though, straight commission probably wouldn't seem so scary.

What is a "sales" position/role in the industry?

Some refer to hunter/farmers.

I've heard some say, "Just sell some $h!t."

Many are consumed with numbers and quotas.

What I find very shortsighted, is the Sales/General Manager, President and CEO who is not aware of what truly motivates their sales people.

That being noted, there are very few who could be successful personally, for their company, as well as for their customer, without having their "self-enlightened interests" (motivations) met.

Clearly the author has some motivations that are being met in what he states.

And there is nothing wrong with that. 

I would just like to know, John Bazyk, what your "self enlightened interests" are.

A couple of considerations on commission vs base:

• I've seen salespeople paid commission only view themselves as not part of the 'team' / 'company'. That they are effectively independent agents since they only get paid on what they close. That can be bad for morale but surely depends on the person and situation.
• Some companies want their salespeople to work on things that help the company but that they won't get paid on (help training others, giving feedback on product issues, supporting other projects or going to trade shows, etc.). When a salesperson is paid commission only, it is problematic to ask / require them to do those things.
• The fewer the number of sales per year, the more lumpy commission payout becomes. I know you don't recommend exclusively selling B2B but some companies by nature of the product or offering are going to be B2B only. And some of them are going after multi-million dollar accounts that can take many months or even a few years to close. In those cases, a base generally helps keep the salesperson engaged and cash flow positive in between the big commission checks.

Btw, somewhat related, at IPVM, we don't do any commissions nor incentive plans. None of us do sales but performance still matters (i.e., how good our reporting / publishing is). However, my concern is that giving specific incentives on page views or comments or shares, etc. could warp people's motivations (e.g., sacrifice on quality or in-depth research in favor of topics that get more 'hits').

Guys with attitudes like Mr. Bazyk are what sales managers love to have. Alot of salespeople get short sighted and dont understand that sometimes making money in sales takes a while. Its just like opening a business and building a business. It can be scarce at first but dont freak out, as long as you trust in yourself and educate yourself to get better, you will make money. 

Commissioned sales fits a certain personality type. its much more risky, but of course with risk comes reward.

Hourly/Salary is much more stable and fits even more personality types. I have experience with guys who perform like rock stars on hourly pay and when given the chance to switch their pay to have a chance to make more money on commission, they just dont perform as well. They feel pressured or something and just don't perform as well.

It took me a few year to understand this but we are all wired differently. I used to think people are crazy for not wanting to take advantage of a high paying commission plan with a little risk. Turns out I was crazy for thinking like this because i failed to understand my brain doesn't work like another guys brain. As an employer, one of the greatest challenges is trying to find how and where people will fit and excel and what motivates them. Im still learning.

Nothing movitates you more to get out of bed in the morning with the mindset of "you eat what you kill"...  It all depends on one's situation in life and the product/service you are selling as to whether she/he can take the risk/reward of working for straight commission only.

After years of believing a base is necessary, I have come to realize that straight commission is the greatest motivator and a salary is a safety net.

Sales people are not stupid and you'll know pretty quick if you will prosper from a plan like straight commission or not... generally speaking, the more complex/bigger the sale the longer it takes... what is critical is to fill the gaps with run rate business inbetween.

Sales is analogous to "whale hunting"... it was a very dangerous/risky profession, not for everyone... you could go out sea for a year and come back empty-handed-  it could change your life or you could lose your life. "Call me Ishmael."

Sales and fishing are similar.  You go out to sell and fish but only get rewarded when you catch something. 

I say that because there are many types of sales and sales people, just as there are many types of fishing and fishermen (not excluding women in either case)

We categorize as Door to Door, B2B, B2C, MLM and more.  You can also separate by the sales cycle or time from inception to close.   Think encyclopedia salesman versus earth moving equipment.

Move through life cycle of the person. Your needs are typically different as a single person out of college or a provider with triplets at home.

I prefer B2B and support with B2C in my role. I prefer a sales cycle of 1 to 6 weeks with both hunting and farming.  I won’t consider a position without a base, but when negotiating I care more about OTE than base.

But that’s me and I fish from a small boat in a lake. 

There are many schools of thought on how to go about finding/attracting, and compensating, sales people.

The method that seems to be most prevalent for B2C outside sales is that you establish a base compensation that allows the sales person to not have to worry about their monthly basic necessities, or at least gives them enough to provide an acceptable, if not ideal, living condition. This would mean a base salary that can cover an average middle class mortgage, car payment, and groceries for a family of 3 or 4.  The logic being that you want the sales person to not have to worry about providing a roof and food for their family, so they can focus on the job of selling. The "extras" in life come from commissions, private schools, high-end car, family vacation, etc.

The other side of the base+commission approach is that in recruiting you look for sales people that are a little "hungry" and have some minor vices like golf/country club memberships, cigar aficionado, wine/beer enthusiast, etc. Someone who wants to live a very simple, basic life will often be seen as "risky", because they can live comfortably on a minimum base and will have less incentive to really over produce.

Also, in this model the sales person often has some constraints on their earning potential in the sense of a defined territory, or in the case of security manufacturers selling through integrators, which removes the ability to entirely control the deal. Overall, if you are a good sales manager, you can setup packages where the sales person can provide the basics for their family, has a quota/commission that enables and encourages them to live at a higher level if they work for it. Your team will likely on average come out to earning about 90% of the total OTE (on-target earnings) budget, as some will hit over 100% of quota, and some will fall a bit short.

The commission-only model is more commonly found in lower-end positions, but where the earning potential is effectively uncapped, and is a target-rich environment where you expect the person can hit a good number roughly equivalent to what would be the base salary in the first example with minimal effort. Sales focused on residential customers are a good example of this, as there are usually more houses than the sales person can reasonably hit, and they are selling a product that theoretically at least a large number of customers would/could buy.

In my experience across a handful of industries, you will often fail to attract the truly best sales people in a commission-only role, unless there are minimal other options, or the product is one in super high demand (basically guaranteed to sell). Top-level sales people understand the value of their product, and also of themselves, and are less likely to take higher-risk commission-only roles unless it is a very lucrative option.

With all these sales experts participating and viewing this discussion, maybe someone could tell me the best way to find one interested in helping a new distributor get up and running and building a new client list?

John, sorry in advance if this is not a relative post for this discussion.

What does the customer prefer, dealing with the guy who doesn’t eat if he doesn’t sell or the guy not so ‘hungry’?

Several years ago I was buying a good deal of musical equipment for a studio.  Outside of the catalog stores, there were two walk-in stores nearby, Sam Ash and Guitar Center.  

GC was known to have a high-pressure, highly commissioned sales force. Turnover was constant. SA, on the other hand was more of the high hourly wage philosophy, with little added commission.

SA was the more pleasant experience naturally, but I remember once waiting in line behind some guy for 20 minutes who had the (hourly) salesperson happily scurrying to find some old manual from a discontinued item he claimed to have owned. After thinking, “I’m here waiting in line, while holding $5000 of stuff, and this guy’s on the phone a half an hour with corporate tech support for a product sold years ago?” What kind of business does that?

So I got out of line and went to GC instead and once I was spotted eyeballing the high-end stuff, I was approached by an eager, if obsequious, associate.  I was out of there in no time, and thinking that’s the way to run a business.

But, as luck would have it, one of my purchases was open box and missing a manual.  When I went back to GC to get it, I looked for Mr. Helpful, but was told he had moved on.  When I asked someone else there for help getting it, he said “I’m sure it’s not in the back room, call the manufacturer.”

Which I didn’t do.  I just picked one up at Sam Ash, no questions asked;)

I think you are like a needle in a haystack. I have never seen a salesperson want to work on straight commission especially with long sales cycles.

I used to be in a different industry, and never had luck with salespeople.

I worked for another security company before starting my own company. The owner hired one guy at $1000 a week, plus commission. He then started handing him house accounts. After I left, he hired a 2nd guy so now he had two sales people. Both salespeople left, and the company has serious financial issues. The salespeople never sold anything.

Thats my fear, hire a salesperson, give them a base, draw etc and 6months later find out the only thing they sold, was their skill set when interviewing...

I am interested to know how a sales guy can sell 3 systems a week, and make 60k. that is around $400 per system.

I have been in professional sales for 20+ years now, and in my experience the basic or retainer the company offers, acts as a safety net.  Why a safety net?  Sales are sales - I go out everyday, get involved, design, produce and deliver - the proposal - and then close the deal.  After that, the project goes onto various other departments - project management, procurement, wiring teams and finally install and commissioning teams.  Timelines, missed deadlines, late payments from the client, late deliveries from the suppliers, bad weather, etc, etc, etc...  are all out of my control, and a deal is only a deal when the final bill is paid. 

Only then, do I get paid my commission.

So, yes - I absolutely ask for a basic + commission, with all expenses covered by the company, i.e. the sales tools required for the job.

I do opt for a low basic and high commission structure, as opposed to a high basic and a low commission structure though.

Well, that is my 2c worth - hope it makes sense.

I'm sorry and I have no intention to offend - but this really does come across as an advertorial. 

I've worked both sides of the pond and the US experience was very heavily led by commission and offset with small salary.

The UK is a mix, but generally salary led and commission topped up. But the ratio varies quite widely.

Commission is fine - but how it is calculated is perhaps the biggest single reasons for sales resignations in the security sector. Anyone can sell a $10 bill for $9, so unless you have a fixed price book - turnover as we all know is for vanity whilst margin will always be sanity. So if you pay commission on margin, what then happen if your project teams fails to deliver or indeed, if your own design was crap to start with?

In the UK we also have to factor in a predictable, steady salary that would support a mortgage application - many lenders wont accept commission. What also of employer pension contributions - will they contribute on bonus and commission payments?

What happens if you fall ill, what happens if your employer has supply issues for commodities you are selling? 

The whole area is a minefield - whichever side of the pond you're on. Personally, I want my sales team to be hungry, competitive and successful. Commission should be based upon margin achieved (GPM) and overall sales. But the big issue in the UK is the resentment of company directors and owners to, potentially, pay salesman a fat commission cheque that would exceed the directors own salary - which is an indication of the shortsightedness and utter stupidity of management not to acknowledge that a stellar salesman can only be an asset to any company.

With all true salesman, it is the single most emotive topic you will ever discuss, but also interesting to see how both sides of the Atlantic address it. Certainly, the US has a culture of gratuity that extends into commission balanced against the onerous employment law in the UK and EU that would protect employees against the risks of commission only.

One view I don't see being addressed (and it concerns me given the male dominated industry) is that how would a female salesperson maintain a meaningful income during maternity leave? It would be grossly unfair not to pay her a cent as the OP's methodology would suggest? 

I disagree that as time goes forward the base should shrink and commission increase. Invariably, a good salesman will go on to lead a sales team, take on more management responsibility and indeed operational delivery - they have also have proved their ability to sell at this point so the base should increase, commission reduce and bonus's be introduced commensurate with the success of their sales team and company success.

Everyone will have their own take based upon their own success and failure in the past - along with excellent and rogue employers. It also depends on what you are selling. Is it a single product in a box or a complex integrated security system?

On a personal note I get my kick from winning tenders, then following the project from concept to handover to ensure what I sold is what is delivered and margin is maintained. It's a little naive to say I do it see a smile on my customers face - I'm neither a charity or a children's entertainer. We all enjoy great service - and are will to pay for it. So with our sector its just the same. But in the reality of commercial sustainability, we must never lose track of cashflow and profitability from a successful business model that will be based upon professional sales delivery. We have a history in the UK of salespeople with little of no experience of the sector being employed by large national companies (one in particular), based upon their previous success in selling unrelated products. They promise the earth given the project delivery team an impossible mountain to climb and culminating in a disgruntled customer. Any customer will be happy if they get what was promised and what they pay for - that's all I seek.

Lone wolf or team member - that's an interesting one. I prefer to be a lone wolf who can work with or without a team. In a small company a crap salesman can not hide like they do in a larger national entity. No salesman should rely on a team for sales - but they should work together to consolidate product, region and client boundaries and present a common sales strategy enforced by a strong Sales Director. I recently tendered a job where two branches of a famous multinational bid against each other unknowingly. I won the tender they both lost - but where was the sales strategy there?

A salesman should never be "comfortable" with a salary alone - nor should they live in fear of their home being re-possessed for failed mortgage payments. They could of  course write a book on it and earn a tasty side income and push it on IPVM! Come to think of it - this posting could be chapter 1 of my book (sorry).

From a management perspective, we often have to turndown work a rep is persuing because the project timeline doesn't line up with available techs/resources. In my dual role as an account manager I couldnt handle a strictly commission comp plan and wouldnt expect a full time sales account executive to to that either. The high commission will come from these projects, vs a reoccurring or post sales/support revenue which will in turn be acting like a base for the commission only rep who could become fustrated when other reps close there projects first and then find out there is no more resources available for his/her project. This happens to us every summer where there is 1-2 months of jammed packed scheduling and if the customer can't wait 4-6 weeks we as reps loose out. We are not a hire and fire organization based on demand, we invest in each of our techs and prefer qaulity over quanity. And in the project based construction world you are rarely notified of an award until they want you onsite, which is way too late to start looking for temps.

Commission only in this industry is tough because the sale is a technical sale. That being said commission with a draw program addresses the concerns and views in this discussion as well as what I encountered founding and running a small integration company for 9 years.  Salary is not healthy for a sales department fundamentally.  

In order for the client to be secure and to spend their money most effectively the sales person has to provide the missing components in any sales scope.  This could be as simple as choosing the widgets to as complex as stopping a sale and saying wait don't do that!  There is a better way.  

This challenge of training and keeping up with new technologies is a true cost to the business owner and commission only programs to not properly address the costs associated with it.  (There are many more costs and challenges as well.  This is just one).  A business owner should take the risk associated with a draw program because they need employees to generate revenue.  These employees need considerable company provided training.   

I do not believe money truly motivates anyone at their core.  It may be what people think motivates them however the age old expression ask someone on their death bed what they want and money is not the answer.  I believe time or some sense of more time for family, friends etc is what most people answer. 

Commission based sales people who truly understand the beauty of sales are the happiest people I have met.  In our industry add the draw component for the sake of the client.   

Looking forward to reading John's book.  If it is a good as what I am reading with his responses above it will help make more people understand why they work and get the time they need for true happiness in life.    

Our philosophy around sales and management compensation has always been; we pay ourselves what we need (salary), and earn what we want (commission/merit). In other words a base salary that covers basic needs and is enough you can live on, pay your mortgage and put food on the table for your family, but an incentive program that rewards success (hard work). 

I don't think you can have a one size fits all, as a junior sales person is very different than a seasoned sales professional in any industry, and where one works harder and another merely smarter, yet both produce results that help them earn what they want absent that fear of what a slow month does to their base living standards. 

While I am sure some can create the right environment for commision only sales, we have never found it, not when there are still so many non-commisionable tasks that need addressing by our front line people, and agents don't feel vested in resolving your issues. Turnover for us has been what really costs, and our experience has been sales agents tend to simply follow the highest bidder, where as employees place much more value on loyalty when it's demonstarted as a two way street. That's what your base salary is really buying, a loyal employee, one that doesn't leave the moment someone waves a little more money, and one that sees cleints as ours and not just theirs.

What gets measured gets managed. I like the scaled RMR model of determining the base salary. The idea of allowing a sales professional to build and maintain his own billing deck within your book of business infastructure. Where saving a customer is just as important as finding one. Where a moving cleint is just an opportunity to make two clients. You want more than an annual cost of living adjustment to your salary? Then grow your billing deck by more than cost of living. You want a higher commision rate? Sell at a higher margin and convince the client to pay you more. If it can't be measured, it doesn't exist. Know exactly what every sales person earns you and pay accordingly.  

How often is it a sales person can make, or get, their own choice? For example,

1. Get base base x, get 10% commission.

or

2. No base base pay, earn 30% commission.