Commission vs. Wage - How Do You Decide?

12 replies
I was speaking with a fellow Warrior and he told me about a merchant processing company that pays an attractive base + commission to it's sales reps. When I heard what the base was ($30k) - I was floored. I've never seen or heard of a merchant processor offering that kind of base, I have seen minimum wage your first 2 weeks to a month but that's about it. I was super curious though because I've been thinking about this for a while..

He wasn't in a position to say a ton about them as he maintains a working relationship with them, but hinted at there being a unique selling point that anchored a sales process. The sales process was optimized to be repeatable (efficient), so by installing people into it and paying them a guaranteed wage, they got a lot more upside.

I've been thinking about this a lot and here are some bullets I jotted down as I mulled this over....

Benefits to hiring commission only sales reps:
  1. Less red tape (dealing Uncle Sam and so forth).
  2. Mitigates downside risk... You will never pay anyone for $0 worth of production.
  3. Can use the commission model as a "cheap" way to learn and optimize training and your sales process to be as efficient as possible.


Benefits to hiring wage earner (+ bonus) sales reps:
  1. Attracts a wider pool of talent. You'd be surprised what people will do to earn a guaranteed paycheck in a couple of weeks.
  2. They'll work harder to keep that locked in wage vs. the impetuous commission only guy.
  3. More profitable in many cases where you're making 4 figure sales.


It seems like starting with commission only sales reps so as to optimize a killer training and sales process before going the wage earner route makes the most sense. Hiring wage earners without a killer sales process and a great training structure is flushing money down the toilet.

However, this is all subjective because there are certain products that I would never in a million years offer for a wage no matter how tight my sales process and training process was. Like offering alternative business loans for instance.

Case in point; I know that Groupon hired people based on salary. In the case of Groupon that made a lot of sense because if they paid commissions they would have been far less profitable. Groupon was selling a "unique" and shiny object; "loads of customers, all kinds of exposure, a newer brighter future, etc." They literally had people wait listed for months... And "group think" was a driver as well; "everyone else is doing it, I may as well do it too..."

Nonetheless, I welcome you guys' thoughts and experiences...
#commission #decide #wage
  • Profile picture of the author gjabiz
    Subjective as you say and determined by need.

    We are currently offering commission only opportunities for those exact reasons you spelled out. And the "impetuous" point is spot on.

    On the other side, I've worked under both structures, my lowest salary was 500 per week + commission (Remote Direct Marketing of supplements)

    And with commission only there has been a sliding scale based on performance, to help ME overcome those impetuous moments.

    A hybrid is salary which becomes a draw over time.

    And as a creative, I've taken smaller amounts of up front money for a higher commission on projects which I felt I could perform well in, and more money less back-end on projects which lacked potential (although I've been wrong on both accounts).

    I'm also a fan of short term contracts, 90 days, which are renewable with performance goals reached, this gives you and the person you've given the opportunity to see how things work out. With a 1099er you can use the 90 days as a trial to hire.

    Depending on the project, I like commission only for starting, it is a quick qualifier, and reward the ones who perform with tier and unexpected bonuses...and, if needed, convert them to a payroll person.

    gjabiz




    Originally Posted by TheBigBee View Post

    I was speaking with a fellow Warrior and he told me about a merchant processing company that pays an attractive base + commission to it's sales reps. When I heard what the base was ($30k) - I was floored. I've never seen or heard of a merchant processor offering that kind of base, I have seen minimum wage your first 2 weeks to a month but that's about it. I was super curious though because I've been thinking about this for a while..

    He wasn't in a position to say a ton about them as he maintains a working relationship with them, but hinted at there being a unique selling point that anchored a sales process. The sales process was optimized to be repeatable (efficient), so by installing people into it and paying them a guaranteed wage, they got a lot more upside.

    I've been thinking about this a lot and here are some bullets I jotted down as I mulled this over....

    Benefits to hiring commission only sales reps:
    1. Less red tape (dealing Uncle Sam and so forth).
    2. Mitigates downside risk... You will never pay anyone for $0 worth of production.
    3. Can use the commission model as a "cheap" way to learn and optimize training and your sales process to be as efficient as possible.


    Benefits to hiring wage earner (+ bonus) sales reps:
    1. Attracts a wider pool of talent. You'd be surprised what people will do to earn a guaranteed paycheck in a couple of weeks.
    2. They'll work harder to keep that locked in wage vs. the impetuous commission only guy.
    3. More profitable in many cases where you're making 4 figure sales.


    It seems like starting with commission only sales reps so as to optimize a killer training and sales process before going the wage earner route makes the most sense. Hiring wage earners without a killer sales process and a great training structure is flushing money down the toilet.

    However, this is all subjective because there are certain products that I would never in a million years offer for a wage no matter how tight my sales process and training process was. Like offering alternative business loans for instance.

    Case in point; I know that Groupon hired people based on salary. In the case of Groupon that made a lot of sense because if they paid commissions they would have been far less profitable. Groupon was selling a "unique" and shiny object; "loads of customers, all kinds of exposure, a newer brighter future, etc." They literally had people wait listed for months... And "group think" was a driver as well; "everyone else is doing it, I may as well do it too..."

    Nonetheless, I welcome you guys' thoughts and experiences...
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  • Profile picture of the author Claude Whitacre
    Originally Posted by TheBigBee View Post

    I was speaking with a fellow Warrior and he told me about a merchant processing company that pays an attractive base + commission to it's sales reps. When I heard what the base was ($30k) - I was floored. I've never seen or heard of a merchant processor offering that kind of base, I have seen minimum wage your first 2 weeks to a month but that's about it. I was super curious though because I've been thinking about this for a while..

    He wasn't in a position to say a ton about them as he maintains a working relationship with them, but hinted at there being a unique selling point that anchored a sales process. The sales process was optimized to be repeatable (efficient), so by installing people into it and paying them a guaranteed wage, they got a lot more upside.

    I've been thinking about this a lot and here are some bullets I jotted down as I mulled this over....

    Benefits to hiring commission only sales reps:
    1. Less red tape (dealing Uncle Sam and so forth).
    2. Mitigates downside risk... You will never pay anyone for $0 worth of production.
    3. Can use the commission model as a "cheap" way to learn and optimize training and your sales process to be as efficient as possible.


    Benefits to hiring wage earner (+ bonus) sales reps:
    1. Attracts a wider pool of talent. You'd be surprised what people will do to earn a guaranteed paycheck in a couple of weeks.
    2. They'll work harder to keep that locked in wage vs. the impetuous commission only guy.
    3. More profitable in many cases where you're making 4 figure sales.


    It seems like starting with commission only sales reps so as to optimize a killer training and sales process before going the wage earner route makes the most sense. Hiring wage earners without a killer sales process and a great training structure is flushing money down the toilet.

    However, this is all subjective because there are certain products that I would never in a million years offer for a wage no matter how tight my sales process and training process was. Like offering alternative business loans for instance.

    Case in point; I know that Groupon hired people based on salary. In the case of Groupon that made a lot of sense because if they paid commissions they would have been far less profitable. Groupon was selling a "unique" and shiny object; "loads of customers, all kinds of exposure, a newer brighter future, etc." They literally had people wait listed for months... And "group think" was a driver as well; "everyone else is doing it, I may as well do it too..."

    Nonetheless, I welcome you guys' thoughts and experiences...
    It isn't the hiring, it's the training....it's the selection process. What do you do with the rep after they start?


    If training is, "Here's a script. Here's a list, go to it"...... the rep will likely fail....and you'll hear every excuse imaginable.

    If the training is, "I'll show you ten sales in a week. You'll see how easy this is, and that people buy. Then I'll meet with you every day, to sharpen your skills, and keep you making money."....you'll have a rep who knows that selling is a process that can be learned.

    When you hire a rep, are you hiring someone who is thinking about guarantees? Security? vacations? You'll get them, if you offer a salary.

    If you want sales sharks that will make sales, pay a high commission, and sculpt your interview around that.

    Commission is more. Commission salespeople make more than salaried salespeople. A salary is a way for the top producers to help pay for the weakest reps.
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  • Profile picture of the author tryinhere
    Originally Posted by TheBigBee View Post

    I
    I've been thinking about this a lot and here are some bullets I jotted down as I mulled this over....

    It seems like starting with commission only sales reps so as to optimize a killer training and sales process before going the wage earner route makes the most sense. Hiring wage earners without a killer sales process and a great training structure is flushing money down the toilet...
    I am guessing you dont have much experience at all with sales and that's why your guessing ? and you hire then use comm guys to develop your sales script before dumping them fr the paid guys.

    It's a long way to the top sometimes for some people and I am not sure why people treat sales people like meat or cannon fodder when for most comm guys the manager who thinks this crap up and there are a lot of them have no idea at all and then they wonder why things don't work and all they would do is blame the sales guy.

    I promise with that thinking you would only attract bottom level if that people to sell your product, you waste your time and theirs.
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    • Profile picture of the author TheBigBee
      Originally Posted by tryinhere View Post

      I am guessing you dont have much experience at all with sales and that's why your guessing ? and you hire then use comm guys to develop your sales script before dumping them fr the paid guys.

      It's a long way to the top sometimes for some people and I am not sure why people treat sales people like meat or cannon fodder when for most comm guys the manager who thinks this crap up and there are a lot of them have no idea at all and then they wonder why things don't work and all they would do is blame the sales guy.

      I promise with that thinking you would only attract bottom level if that people to sell your product, you waste your time and theirs.

      It sounds like you have had some really bad experiences. I'm sorry those experiences have lead you to attack me personally - someone you don't know.

      I've been selling all my life. Door to door sales for years. I was treated Ike a piece of meat. Cattle. Ran sales crews and currently rely on closing deals in order to pay my bills... I sell money. I also sell consulting on the side. The money isn't cheap and neither is the consulting.

      But while you have gone personal, I will not. Instead I will take you through my line of thinking.

      Groupon
      1. Hired salary.
      2. Scaled fast.
      3. Dumped salaried employees.

      After dumping the salaried sales reps, they were able to lock in a greater share of long term revenue. Not only that, they were able to lock in a greater share of short term revenue while also maintaining tight control over sales and recruiting.

      Not sure if you knew, when you hire indie contractors you're precluded from doing things like training them. Legally, the instant you start training a 1099, under a structured training program you're in violation of the law.

      You were right about one thing... Long way up to the top. I started off being used like a peace of meat 6 days a week. I figured out how to use the experience to my advantage.
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      • Profile picture of the author tryinhere
        Originally Posted by TheBigBee View Post

        I've been selling all my life. Door to door sales for years. I was treated Ike a piece of meat. Cattle. Ran sales crews and currently rely on closing deals in order to pay my bills... I sell money. I also sell consulting on the side. The money isn't cheap and neither is the consulting. .
        It was not meant to be personal but more a broad view, but I will man up and say I called it wrong or could have called it better on this one and apologise for that.
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  • Profile picture of the author Freebiequeen1999
    Honestly most of the people I see here looking for "sales reps" are out to waste other people's time
    The good news is most real sales people will not even deal with nonsense like this

    Oftentimes the idea here is to get someone to write your script, objections, comebacks - develop your whole sales process then you think you can farm it out to someone in India or Philipines

    good luck with that. Here is a funny thought - it would be funny if a salesperson took a warrior "idea" and ran with it themselves LOL.....once they know the company hopefully they will jump ship and apply for the position themselves...at least they know how to pick up a phone and sell.

    I agree with Tryinhere - the complete disrespect to people with sales skills is very disheartning
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    • Profile picture of the author ewenmack
      The following is my one and only experience coaching
      a telephone one call close sales guy.

      I identified him as having the traits
      of a superstar sales guy about a week in.

      Since I'm talking with him everyday for the last month,
      I get to observe and learn how he thinks and what he thinks about
      compared with the other 14 in the phone room.

      Let's back up.

      He calls me the day before his job interview with the largest
      media company in his country.

      He was panicking on how to handle the interview
      because he really wanted the sales job in the media company
      and get very good at sales.

      He nailed the interview and gets job.

      He is already #2 in sales and #1 in dollars brought in
      for the month.

      He is breaking barriers regularly...

      Like

      1 Monday was always his worst day.
      This Monday was his biggest day

      2 He can adapt to the softer women and close them

      3 He can adapt and close the hard driving
      "get to the point" style guys.

      4 He can close the ones that say "you've only got 2 minutes"

      5 He can get through the gate keeper and speak to the country
      ceo of the largest freight forwarding company in the world

      Now here's the thing about his successes, if he isn't challenged
      and incentivezed by big enough rewards, he gets dissatisfied very quickly.

      This leads to him looking elsewhere where he can
      be challenged and having greater rewards for breakthroughs.

      Recognizing that, I'm scrambling to create a new business
      that is the right model to fit superstar sales people like my client.

      The biz model is recurring monthly fees and he gets
      all the money from sale minus the hard costs.
      This works out about 80% he keeps.

      I write the phone script for him.

      We are trialing it for 2 weeks while the phone room
      is shut down for the holidays.

      There's no base, it's 100% commission.

      I've already shown how he can make more money beyond lifting his closing ratio
      so it tests his pre-existing assumptions what is possible.

      So to summarize, knowing how to recognize superstar sales people by their traits,
      know how to recruit them, how to nurture them...then create a biz around these superstars is I believe a recipe for rapid biz success.

      The business model for the whole sales training world is
      lifting those with ordinary sales traits to do better.

      The biggest return on time and investment is hiring those
      who exhibit the traits of a superstar.

      And you can get them on 100% commission.

      The breakdown is people don't recognize a
      superstar and fall for those that appear to be of that status.

      That's the catch.

      Best,
      Doctor E. Vile

      P.S. The company he admired and wanted the job badly as a sales rep there,
      is rewarding the wrong things.

      They are rewarding the bottom and medium closers.

      Like...

      1 make a sale and you can go home for the day

      2 Allowed to give discounts up to 50%
      without a longer term commitment by the buyer

      3 Base pay is lifted after hitting a benchmark
      when the commission lift is what a superstar wants.

      Superstars aren't rewarded.

      I guess it's because they have a room full of ordinary sales people
      and they dream up ways to get more production out of them.

      The problem all stems from not knowing how to recruit superstars
      and then give them what they want
      to excel.
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    • Profile picture of the author TheBigBee
      Originally Posted by Freebiequeen1999 View Post

      Honestly most of the people I see here


      good luck with that. Here is a funny thought - it would be funny if a salesperson took a warrior "idea" and ran with it themselves LOL.....
      Keyword HERE. Here = not place to recruit.

      There are tons of nuggets of gold here that no one is taking and running with. Ideas constantly generated that are ripe for "stealing."

      Also whenever I hear "steal an idea" I chuckle inside. Most people find it so difficult to execute on their own idea that stealing others' is not in the question. Call 10,000 THRIVING businesses and try to get them to steal your idea. Then call 10,000 businesses and then try to sell them something.
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  • Profile picture of the author TrumpiaTim
    I noticed that a lot of sales organizations where they tend to go through sales reps quite quickly work on a pure commission based system. Whereas organizations which are trying to retain talent and have individuals grow over the years with the company will have a more attractive offer by doing a guaranteed base + upside.

    They both makes sense, I guess it really depends on the expected lifetime of a sales rep with any organization which might dictate which option is better to offer.
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    • Profile picture of the author Barry Unruh
      Originally Posted by TrumpiaTim View Post

      I noticed that a lot of sales organizations where they tend to go through sales reps quite quickly work on a pure commission based system. Whereas organizations which are trying to retain talent and have individuals grow over the years with the company will have a more attractive offer by doing a guaranteed base + upside
      The opposite side of that statement is that most frightened sales reps tend to choose an opportunity with a guaranteed base + upside, where highly confident reps are more likely to look at the overall opportunity to see which offers the most potential.
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  • Profile picture of the author writeaway
    If I was offered a choice between commission or wages, I would always choose commission.

    I will always choose to work on commission.

    This, of course, is assuming that I really know my game.

    If I have the game down tight, then this is a no-brainer.

    Why?

    I would always make more money with a commission system because I know my stuff.

    I know that I can convert.

    I know that I can produce a certain sales level.

    I know that I can pretty much write my own paycheck.

    However, if I’m still trying to cut my teeth into the game or I have some serious confidence issues, then I would take the security of a wage.

    A wage really is for people simply looking for guaranteed results.

    This really is too bad because if you are a serious producer, you’re actually selling yourself short with a wage.

    The value of your sales might actually be in the millions and you’re just simply settling for a tiny fraction of dollars for all that quality work.

    Again, there’s really no right or wrong answer here.

    It all boils down to what’s important to you.

    If your value stands to lean towards security or if you have small children to take care of, or you have a lot financial obligations, then wages might be the way to go.

    However, if you are a fairly young person or a seasoned professional who really know your stuff, then commission is probably the more attractive route to take.
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  • Profile picture of the author decidefreedom
    Mmmmm something to think about.
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