Taking what I'm given 'cause I'm working on commission
August 8, 2011 7:29 PM   Subscribe

What is it really like to work (primarily) on commission? I have never worked on commission before and I am worried it will be stressful and full of conflicts.

I was recently offered a job that was to be paid as a month draw + commissions of "sales". I was going to be the only person at this company paid in this manner, and the target compensation is $150,000. The draw would be about $2,500/month. Without getting into specifics the product was not insurance or retail banking products like home loans or refinancing, although I suppose those would be the closest analogs.

The draw was to cover a fixed part of my job, and the commission was calculated on "sales" as well as how these "sales" paid off. This is for a legit company (not Cutco for example). I am leaning toward not taking the job because:

1. I would always be worried about hitting my numbers, would be afraid to take time off, would worry about my personal finances if I didn't make my numbers.
2. I was worried I would be conflicted between doing what my draw paid me to do (think detailed paperwork) and doing work that would earn me commission.

Some questions:

1. How stressful is it to work on commission, especially for the first time?
2. What does "target compensation" mean? Are target numbers always achievable or are they best case scenarios?
3. Better to take the job listed above, or one that pays half as much, but on a salary basis (i.e. guaranteed)?
posted by anonymous to Work & Money (7 answers total) 2 users marked this as a favorite
If the draw is $2500 a month the targeted earnings are not $150K. They are full of shit. If they really think it's realistic for you to make $150K in your first year you they should have no problem paying you a draw of $75,000 a year. The fact that the draw is $2500 a month tells me they really believe you'll be doing good to make $60K your first year.

What is really going on is that they are paying you $2500 a month to build a pipeline, under the assumption you'll get way behind on your draw, get discouraged, and quit before you sell much. Then they close the deals as house accounts, or give it to their favored sales rep who really does make $150K because he has been there forever and he inherits a pipeline a couple of times a year.

Basic rule of sales - never sell for somebody else on straight commission. If you want to take on that kind of risk start your own company and become a sales agent, at 2 or 3 times the commission rate.
posted by COD at 8:01 PM on August 8, 2011 [10 favorites]

Yeah, the above advice is pretty good.

(Is the draw recourse, or non-recourse? That makes a huge difference. Going into debt for a company is... well, it's rough.)

It's odd that you're a sales force of one though. (Though that does happen!)

As for targets, you should check the contract carefully. If your income is capped, usually that's total horseshit. (What's the point then?) And if there are penalties to "under-performing," well that's pretty bad too--because you have no team, no nothing.

One thing in commission-based pay to learn ahead of time is the delay between closing and pay, and similarly you should get a good sense from them of how long it'll take to secure business. The most stressful part is the ramp-up. A good sales job is nice once it's up and running. In many cases, it can run itself. But starting out, oof. It can be horrible securing a book of business.

If you're freaking out... well, I guess I'd say, if you like the company, and like the people you work with, give it a shot? Some people love living like this. Me, I hated selling. I finally figured out that the meaner you were to clients, the more they wanted to buy, and by that time, I was like "get me out of here." But then I can see how people made it work for them real well.
posted by RJ Reynolds at 8:16 PM on August 8, 2011 [2 favorites]

If you aren't a salesy type person, this is not the job for you. There's a very specific personality made out for sales and most people aren't it. You are better off--and happier off--with a job that compensates you less but nourishes your soul more. And that might sound cheesy but it's damn true.
posted by satyricaldude at 8:28 PM on August 8, 2011 [3 favorites]

I've worked more than a few years in sales and recruiting, and all I can say is that this job better be in a very good industry for a draw to end up being anything other than a problem for you. Its been years since I've worked in a draw/commission position; Luckily for me it was in tech a couple of years before the dot com bubble burst. Were I to choose I would rather work straight commission, because there's no potential hole being dug by a draw in a weak sales environment. Sales is never something you should get into if you need steady money right now, because sometimes no matter how motivated one is the sales may be fleeting, slow or downright nonexistant.

As always, if the deal looks too good to be true, it probably is. Good Luck!
posted by chosemerveilleux at 8:59 PM on August 8, 2011 [1 favorite]

COD has it. Complicated sales cycles can take 9 months or more to close. If you're starting from scratch, it could even take longer. That means you probably won't make more than your base this year. And then they can turf you and give your accounts to someone else - and hire another sales rep to do your work. Repeat.

About 15 years ago, a company offered me $2500 a month as a base in a commissioned sales job for a very complicated and new product. I told them I wasn't comfortable with a base that low. They said they didn't want me to feel comfortable at all - they wanted me selling. I turned them down, saying that it was not in their interests to have a sales person who was making hasty decisions because they couldn't even put a roof over their head, especially when anyone looking at the job knew it had a 9 to 18 month sales cycle and there was no infrastructure.

But $2500 today all these years later? When they're claiming that the target is $150k? Sounds even fishier to me.
posted by Chaussette and the Pussy Cats at 9:55 PM on August 8, 2011

There's a lot of over-generalizing here. Plenty of industries have 100% commissioned sales people with a practice of allotting a minimal draw for those starting out. A minimal draw serves important purposes besides a bit of income to the salesman: it avoids wage and hour regulation issues, it substantiates employment for the salesman to be added to benefits, it provides a baseline for severance and unemployment if the salesman can't cut it, etc.

The advice to understand the commission and draw agreement is very good. These should be spelled out in great detail. Frankly the $150,000 target is what worries me: good professional salesmen earn much more, and a good sales manager designs a sales job with the potential to get there.

I think that the avoid to avoid sales for personality or stress reasons is bad. Lots of different kinds of people can be good salesmen of good products: the job is about listening and learning and teaching far more than it is about anything else. Pay for performance is how the world is ... sales just makes that particularly explicit. Potential for less politics, not more.
posted by MattD at 10:12 PM on August 8, 2011 [1 favorite]

without knowing the specifics of what you're selling and how your commissions get paid (percentage of profit vs. total sale, for example) it's well nigh impossible to ascertain if the deal is good or not. ultimately you're going to have to go with your gut.

as for 'owing' the company money--if i left owing due to a draw and they asked me for the money I'd laugh and tell them to bite the big one.

what concerns me here is the lack of support: when you're a commission salesperson you do not make any money until the deal closes. any sales of substance (and your position most surely qualifies) requires a lot of support work--filling out paperwork, holding the hand of the customer and even sometimes doing the work yourself. an example--i once had to go out to a house and climb a ladder to put plastic on some vents in a customer's living room. i had already made the sale but the workmen refused to do the work--so i had to do it or have the job canceled. i did not make any extra money for the extra work.

and then there's the people who you will spend tons of time with--only to have them decide no for whatever reason. that happens and a lot of times.

the fact that you're asking this question indicates that you are unfamiliar with this lifestyle. that is probably your biggest problem: are you prepared to be rejected, to be called an asshole and to have people insult you simply because you ask them if they want to buy something? because that's what's going to happen sometimes. and when it does you should smile and say thanks and suck up to them anyway because sometimes that's how sales are made. if you think i'm kidding check out some of the askme's that i've responded to about telemarketing.

on the other hand mattd is right. 150k a year for sales is just the beginning. you get the right gig and that's peanuts. sales are for people who want to make a fuckload of money and are willing to almost anything to get it. if you're confident you can do it, go for it.

also remember, especially if you're the only sales person--you will be the primary contact for most of your company's business. once you get rolling you will have a shitload of power to renegotiate. there's a reason why a lot of sales people are also vice-presidents.
posted by lester's sock puppet at 10:50 PM on August 8, 2011

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