One of the key purposes of incentive compensation is to motivate the salesforce and ensure their engagement, commitment, and loyalty to the organization.
But this usually applies when the salesforce has a pay mix where their income is a combination of fixed pay and variable pay. It is that variable pay that enhances performance.
But what happens when the total of a salesperson’s income is commission?
Does it fulfill all the above-mentioned purposes? Or should we look at commission-only sales reps with a different approach?
In this article, we will explore commission-only sales reps, the pros, and cons of applying such a sales pay method from both the employee perspective and the organizational perspective as well as look into a few strategies that help commission-based salesforce to better perform in the game.
So scroll down for more reading.
In most instances, a sales rep’s income is divided into two parts.
The base salary is the fixed amount they will earn irrespective of their sales in that month and the commission which is the variable pay influenced by the sales metrics.
But there is a category of sales reps who work only on commission. Their monthly pay has only one part, i.e., commission.
From a company point of view, maintaining a workforce based on commission aligns well with a structured sales funnel vs sales pipeline strategy, driving both individual performance and overall revenue growth.
Let us know more about it.
Commission-only sales reps enjoy a great deal of benefits in their work culture. These include:
Sales reps can decide their time and days of work in commission-only compensation. There are no fixed timings that they need to follow and their goal is only to close deals to get the commission at the end of the month.
This flexibility helps them to ensure a work-life balance, prioritize their personal life without giving up their career as well as can be taken up as a part-time job that provides additional income.
The best part of commission-only sales reps is that there is no commission cap. Though not an ideal practice in incentive management, some companies put a limit on the commission their sales reps can earn. This can become a major demotivating factor in their performance.
In this commission-only sales job, the income is solely calculated on the sales the reps make, with a generous sales compensation plan example that rewards high performers, ensuring their earnings directly correlate with their sales achievements and contribute to their OTE salary.
The biggest setback of commission-only sales reps is job security. They do not have a fixed tenure for their work and their employability solely depends on their competence and self-discipline.
Sales reps have to work hard to find their own space and name in the industry and ensure that people are confident in getting them onboard.
You never know what the market status is. Some months you might be able to close a deal easily and in others even generating a lead will be hard. Hence, there is no stability in the income you earn.
This can create a bit of tension in your monthly planning and money management, especially if you have loans to pay and a family to take care of.
Since commission-only sales jobs are mostly freelancing, companies are reduced the burden of managing a large workforce. This helps management to focus on other areas of operations and growth.
Companies only have to ensure that they allocate a budget for the sales reps and pay them on time for their work.
Companies can also ensure more sales as the sales reps will be competent to bring new business each month as their income is dependent on it. Hence, they can achieve consistent growth by aligning their efforts with the objectives of sales management, which include setting targets, optimizing resources, and fostering long-term customer relationships.
Finding highly skilled and competent sales reps becomes hard for companies in a commission-only format. As a flexible job, there are higher chances that your top sales reps might shift jobs easily when better pay is offered and when opportunities come.
Hence, there will always be high employee turnover and the rush to find equally talented substitutes at any time.
A commission-only sales rep is not bound by any obligation to the organization. They are there to get you business and get paid for it. In such a situation expecting commitment and dedication is off the charts.
Therefore commission-based sales reps might not be the loyal employees whom you can turn to at times of crisis.
Hence, from an organizational and workforce point of view, a commission-based sales job has its own set of advantages and disadvantages.
For more tips to improve sales opportunities, check out Optimizing Sales Performance with Metrics that Really Matter.
Being a commission-only sales rep requires a lot of perseverance and hard work to be noticed and recognized as a competent player in the industry.
Here are a few points that will garner that success.
Sales reps must be competent in their field. They must ensure that they reach out to the prospects on time, generate a good number of leads in their pipeline, prioritize them by lead scoring and work consistently towards closing deals regularly.
Though it is not as easy as said, there is a need to be the top talent for regular income and job satisfaction.
Sales reps must be always ready to learn. They must introspect their tactics, look closely at the success rate of their strategies, and look for other approaches from peers to understand what are their strengths and their weaknesses.
This consistent evaluation of oneself and readiness to upskill will help sales reps stay motivated and focused in the longer run.
As mentioned, commission-only sales reps are high-risk job profiles. There is the question of a steady source of income as well as job security.
With all these probabilities in play, sales reps must always be a step ahead in planning their next step, it can either be their next sale or the next opportunity that will ensure no break in their income.
Sales job is all about building networks and relations. Even if a sale does not happen, your approach to the client and the relationship you built can open doors to future sales or references to other clients who might need your product or service.
Hence consistently keeping in touch with your past and present prospects will lead to better opportunities.
Commission-only sales reps must not wrap their job with just bringing in deals for the company. You must also take the initiative to ask for feedback from your employer and build a rapport that makes them feel that you are loyal to the organization and dedicated to your work.
This will ensure your longer association with the firm and a better guarantee of employment.
Hence, commission-based salesforce must take that extra mile to ensure they are in a comfortable position to continue doing business and earning a steady source of income.
For better informed sales enhancements techniques check 6 Mistakes Every Sales Rep Needs to Avoid!
Commission-only sales reps have immense opportunities in the sales industry. With a focused approach and motivation to work harder, you can achieve great success while maximizing your revenue.
A better solution to streamline the job and bring in efficiency is through automating your incentive compensation management.
Incorporating such digital tools helps sales reps have access to real-time visibility of their commission, plan the number of sales they need to close to attain their sales quotas, and improve their on-target earnings, etc.
From an organizational stand, incentive compensation management tools help them plan their budgeting for incentives and also track sales performance with accuracy.
Hence, automating your sales management, helps both the company and the workforce to enhance their operational efficiency.
Kennect offers incentive compensation and sales performance management tools to create transparency and achieve operational efficiency.
For more information, Book A Demo Today!