Commission Only Deals – Do They Work?

As an industry, working in sales can be seen as being very lucrative. And that is why many people tend to join the growing ranks of salesmen and women – the attraction of money for some is too much to ignore.

We all know that sales professionals the majority of the time work on some form of commission basis; earning a bonus when they happen to sell a product or service. And this can be a very nice thing to receive for all of the hard work that you have pulled off; all the long meetings, telephone calls, emails sent and generally chasing prospects to get them to sign a contract. Normally, a commission scheme is put up against a salary also; so a sales person is earning a commission AND a salary.

However, for years and years and years, many sales people have been paid JUST a commission. Of course, normally this means that the rate of commission is at a higher percentage to make up for the lack of salary and can still be as lucrative. This also massively benefits the business owner too! They do not have to pay anything out until the sales person brings in results, so this latter decision can be a very shrewd decision made by the business owner.

But is this ‘commission only’ way of paying an employee the best way to go? Is this the most cost-effective method to pay your sales people?

Allow me to share with you my top three reasons as to why paying sales people just commissions could be damaging your sales process!

1) Commission only motivates certain people.

Although they say that money makes the world go around, only a certain few will see money as a burning motivation to work. Of course, there are those that LOVE money and will do anything to chase their next bit of income. There are those that want to boast a big bank balance and drive around in the fanciest of cars.

However, on the flipside of that are those that are not driven by money. Does this mean they should work in sales? Hell no! Some of the best sales people I have ever met care less about the financial gain and more about the helping of clients and customers.

So, if you are only offering a commission only compensation plan you will only attract those that see money as a high reward and turning away those whom may be able to work in a more consultative selling position.

2) Commission can lead to a high turnover of staff.

Let me paint a picture in your head for a moment. Let’s think of a sales person’s career as a fire. As all know, to get a fire going fast, and to maybe give it a boost we have to put something highly flammable on it. Petrol or kindling spring to mind. But what happens if we constantly have to put petrol on a fire? It takes up a lot of time, uses a lot of fuel and does not take long to just burn out. So what happens if we put solid wood on the fire? The fire burns for a longer period with less effort and more effectively.

In this example, the petrol or kindling is commission, and the wood is a salary. There might be times in our career when we want a quick hit, when we can really warrant the larger, more intense hits of commission. But there will be times in our life when we need something more constant, more stable perhaps.

What happens if you take on someone whom has been happy accepting commission for so long then due to a change in circumstances (wanting a mortgage, growing a family etc) they suddenly need a more stable income? They are going to leave, right? That person could be your best performing sales person and all of a sudden you have lost them. You can always ADD a commission as an incentive, but you cannot take one away that easily.

Plus, the highly competitive nature of a commission-based plan can soon turn people off and will make some leave to find a calmer environment.

3) Too much pressure is put on your prospects.

What happens when your next mortgage payment rides on a sale being closed? You will force the sale, lie, cheat and generally push the prospect to sign the deal – even if they have no need for it! The same can be said for appointment booking to! Do you want appointments set up that have a high chance of being closed, or just an appointment because the prospect felt obliged to accept?

Sure, putting pressure on prospects will help you close more sales. However, in doing so you will see a whole list of unhappy customers and a reduction in referrals, recommendations and repeat business.

A commission-based plan puts far too much pressure on sales people to perform that has a knock-on effect to the prospect too.

 

So next time you are planning out what you should be paying a sales person try to remember these points. There is no real right or wrong reason different plans will suit various businesses and individuals so always do what you feel is right and will keep everyone happy!