I started writing this blog article a few months back after a humorous, but fairly typical conversation with someone, then I got sidetracked and never published it. I was on a cross-country flight yesterday and decided to finish it.
It’s about being on the tightrope we call COMMISSION sales.
I was having a casual conversation with a friend of a friend a few months back. He wasn’t a true outside sales guy, he was more of a client support and consultancy dude. He and I were discussing outside/commission sales. He was asking about the compensation plans that I had worked under during my lengthy sales career. I told him that I had been W2 for a short period of time, but had been straight commission for most of my career. Then I mentioned to him that I had been most productive and was, by far, the happiest when I was 100% commission—no floor—no ceiling.
He wrinkled his face and rolled his eyes at me when I said that. It was the kind of face that people make when they perceive themselves as just a bit too good for something. Of course, I get it, especially because this person had the burden of seven years of university education. I think anyone who spends that long in an academic environment and isn’t a practicing doctor, lawyer or professor probably got pretty comfortable in their bubble and by default, became a bit risk averse.
“Wow, you can actually find decent people that are willing to work on straight commission?” he asked.
I explained to him that we actually did. I tried to help him understand that some of the better opportunities out there, from a gross income standpoint, can be found in commission sales, opportunities in the insurance, investment, real estate industries or network marketing.
He did the nose wrinkle thing again and offered a long-winded commentary on the reasons people wound up in 100% commission sales gigs. His diatribe included the words, “Desperate,” “Uneducated,” as well as the term, “Bottom feeders.” I wanted to slap some sense into the guy (literally), but part of me was enjoying his rant. He was kind of mean, but in a funny way. His reasoning, however, was loaded with stereotypes and was badly flawed.
When he let me get a word in edgewise, I told him I’d interviewed over 6,000 commission sales candidates and the question, “Is this commission only?” would usually come up quickly. I told him my answer was always the same…
“Ultimately, every sales related job is 100% commission and the people we wish to hire are those who prefer to acknowledge this reality up front and then get on with the job of writing their own paycheck and limitless future.”
I told him that I would always explain my position and hypothesis in detail to the potential candidate in this manner:
If I hired them at a salary of $45,000 per year, that’s $3,750 per month, I would expect them to work at least 40 hours a week and most of that time would initially be spent prospecting and setting qualified B2B appointments for me. I would set a quota of 10 ‘net’ appointments per week, which means they would need to set 12 – 13, based on the reality of prospect cancellations.
I would then advise them that I was a fairly solid closer, which means I’d close at least 4 of those 10 presentations immediately (and get 1 or 2 more sales later down the line, after multiple follow-ups). I would tell them that, based on our average size sale, the advance commissions would be approximately $2,000 per case. This would total $8,000 per week, and a gross, 1099, commission of $32,000 per month.
Of course, my faithful new employee (them), would be earning $865 per week for their 40+ hours of work. That calculates out to $21.63 per hour before Uncle Sam and Uncle California snatch their piece of the pie.
Again, in this scenario, I would earn a gross commission of $8,000 per week and my commitment of time would be solely determined by me. Each presentation would take approximately 45 minutes. Let’s add on travel time to and from the account location and even throw in some time to prepare the presentation collateral. Let’s say each presentation was 2 hours x 10 net appointments for a total of 20 hours per week. I will also suggest that my time, as a top closer, is so valuable that I’d have a junior agent step in and do the enrollment, fulfillment and servicing of my accounts. I would share the gross commissions of $8,000 with my junior agents, netting me $4,000 a week for 20 hours or $200 per hour, and I’d never break a sweat—except on the golf course.
After laying this scenario out to any sales candidate that seemed ‘hung up’ on the 100% commission thing, I’d simply say, “I’m happy to offer you a trial position setting my appointments for me on salary.” Then I’d propose, “I’d also be happy to teach you to do what I do so that you can earn what I earn. It’s really up to you.”
Then I’d just sit back, shut up and smile.
Since I earned over seven figures during much of the later part of my career, they rarely opted for the $21.63 per hour wage I mockingly offered them. (BTW…if you are in any type of role where you have to recruit people, this word text and exchange works phenomenally well to challenge a person into the proper risk vs. reward mindset.)
If you know of my prior business model, you’re probably wondering why I didn’t have a slew of employees on salary cold-calling and booking appointments for me. The answer is simple…
…many sales-type people are inherently lazy!
I tried this strategy once (and only once), and I got exactly what I paid for, a $21.63 per hour effort. I also had to deal with the endless stream of BS, absenteeism and drama. Employees don’t always look out for your best interests…some simply want the check!
Another phenomenon I witnessed was, after all the taxes were taken out of their check, I had to deal with pissed off employees who naturally decreased their efforts and quality of work over time. I’d then have to increase the amount of time I spent micro-managing them. It would become counter-productive to hire people to set my appointments because many risk-averse people are also not internally motivated. They’re typically satisfied sneaking up to the pay stand and staying under the radar.
If you are W2, the bottom line is this; regardless of if you are an entry-level employee or a high-level pro that has been hotly recruited, you’re simply a cost, a line item on a spreadsheet to some executive bean counter in the C-suite.
If you are W2 your company will compensate you just enough to get production done and make the organization profitable. If you don’t hit your numbers, you’ll eventually get fired. If you linger too long, get to the higher levels of their comp plan—get too expensive—they will “eliminate the position” and let you go. You’re simply trading time for dollars and typically building nothing for your future—no equity, no trailing commissions, no residuals or royalties.
I sold products on a 100% commission basis for most of my career. Most of my family and friends looked at me as if I was walking a tightrope with no safety net and certainly no real career security.
However, I never really looked at it that way.
I viewed my scenario this way; I operated under a fair and equitable performance-based compensation plan, one that I was in total control of.
From my first year in sales, I realized that I was willing to out-work and out-study and out-think most everyone. Because of my resolve, I decided never to settle for what someone else decided I was worth. I simply wouldn’t settle for a paycheck someone else wrote for me.
The dude I was talking to a few months back turned out to be a nice guy. We had a few laughs, but agreed to disagree on certain points. Our mutual friend later told me that aside from having an opinion on everything, this guy had been a victim of downsizing and “right sizing” twice in the last five years. He’d never cracked six figures and he was starting to get a little “bitter” about life in general.
I don’t mind having spent most of my career on 100% commission. I’m rather proud of it and wear it as a badge of honor.
I liked spending the last 35 years designing and building my life. I am proud of the fact that I was willing to work harder and smarter than most people around me. I liked writing my own paycheck and creating my own financial security through commission sales.
Don’t you like the idea of doing something like that?
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Joe Buzzello is a nationally recognized expert on direct selling and sales leadership. He has built legacy sales teams and experienced unprecedented success in individual and business-to-business markets as well as the network marketing industry. Joe has held executive level positions for Fortune 500 companies, but he has never strayed far from the art and science of selling, which he loves. In early 2014, Joe began writing, speaking, and coaching through his proprietary platform, The CAP Equation©.
Please visit Joe at: http://www.CAPequation.com
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