Hiring a Commission-Only Sales Rep? Caution is Advised.

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RolodexDuring the past two weeks I had the opportunity to consult with two CEO/entrepreneurs. They’re both in the tech space  just coming up to the point where they are looking for focused sales resources. These are start-up situations.

Since they are very concerned about burning through cash, the idea of having commission-only salespeople selling for them is very appealing.

But, based on my experience, it’s not such a good idea, certainly in these two cases. I’ve seen some real successes using this model and some real disasters as well.

Although I didn’t interview the candidates, they are evidently experienced and were sure to stress to the CEOs the size of their Rolodexes with contacts in the industries these CEOs were pursuing. Both CEOs were quite impressed.

This is what I told the CEOs:

Many salespeople who work on 100% commission (or commission-only plus equity) represent several, or even numbers of, companies. They have a portfolio of products they sell into one or more vertical market segments. I’ve coached dozens of CEOs of smaller companies over the years overcoming significant problems created when they counted on these independent reps to deliver revenue at predictable levels and timeframes, and they didn’t. Targets were missed, investors got nervous, company valuation shrank…

Many of these commission-only people are talented, committed, and work hard. But they are self-employed. And they go where the money is. If they are representing five companies’ products and you’re number six, you have a long hill to climb before you grab their mind share and, as a result, their wallet share. They will sell what they are familiar with. They know those five products, their strengths and challenges, the competition, the messaging, the objections, and how to manage those objections. Layering in your product is time consuming, and time is money.

“But we have a product that no one else has,” said one of the CEOs. He does. It’s quite disruptive, and the CEO was able to articulate to be in very compelling terms the financial value this product will bring to his future customers. But getting an independent rep to sell a brand new product, with no references, is a missionary sell. Time consuming, frustrating, and unpredictable in outcomes.

It may seem a good thing that you only have to pay them when they sell something, but you have no real control over them, what they sell, and how much time they will spend selling your stuff versus what they’re familiar with.

It isn’t easy for a start-up CEO understand that they would fare better if they hire the right salesperson and put them on a comp plan that would admittedly make a major dent in any cash the company has.

If you’re in a situation such as this, let me know privately. Happy to share my additional thoughts.

By the way, if you’re a commission-only sales rep, I don’t have any issues with you. Many of you perform a terrific service in situations other than what I described above.

Image Source: Amazon.com

Republished with author's permission from original post.

Dave Stein
Dave specializes in helping his clients win critical B2B sales opportunities as well as helping them hire the best sales talent.Dave is co-author of Beyond the Sales Process. He wrote the best-selling How Winners Sell in 2004.

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