So, you’re thinking about taking a commission based position. No doubt, you have been told about how fabulous the opportunity is and how much money you could make. The truth of the matter is, commission based jobs are among the best, and worst, paying positions in the country. Some of these positions truly are amazing opportunities. Here are some things to think about before you commit to such a position.
1) What income streams are available to you when you first start out? How about in the next few years?
There is one absolute in anyone’s life. It’s Time. Each of us only has so much of it. In a commission based position, the earnings potential is unlimited, until you run out of time. For this reason, you need to explore with your prospective employer, how you can continue to grow your income when you’ve hit the, “I can’t see anymore people in a day” wall. Here are some examples:
Team building bonus- Many commission based companies will offer people additional commissions on people they bring into the company.
Renewal Income- Does your prospective employer provide you with on-going commissions as long as the person you have sold to keeps the service?
Stock Bonuses- Does your employer offer profit sharing or stock compensation?
Management Opportunities- Can you eventually move to a management position and profit from the people you manage?
Multiple streams of income are important to ensure money keeps coming even if you can’t work for a few days. Remember, commissions only come when you work, so having a back-up plan is imperative.
Find out what the average sale per client is for your new prospective employer. How much money does the average sales person make on the average client? This information is critical when you remember that there are only so many working hours in the day and only so many clients you can see per hour.
When you have the number, multiply it by the average commission earned for the products you are going to be selling. The idea here is to determine how much you will make each time a prospect says, “Yes.”
3) What is the average closing ratio in your future company?
Once you know how much you will likely make per sale, it’s time to discover how hard it is to sell the product. Ask what the average closing ratio is for salesmen in your company. Any company worth its salt tracks these numbers. It is imperative you find out what they will likely be for you.
Once you have determined much you should make per sale and how many people you will likely need to see to make a sale, work backwards to find out how many people you would need to see per week to achieve your financial goals.
Here’s the math:
Financial Goal *divided by* Average Commission per Sale *times* Number of People Presented to Per Sale
Now divide that number by 40 hours in a work week to find out how many people per hour you need to see to achieve your goals.
What does it cost to equip, open, and maintain your business. Things like buying a sales kit, training expenses, phones, faxes, other equipment, gasoline, et cetera. You must consider your overhead when making your decision. Add up the cost of all of these expenses then revisit the math listed above. How long are you going to have to work to make up for what you had to spend?
5) What kind of training program does your company offer?
Does you company offer a detailed training program with classroom and field training? Training is critical for your success in a commission only position. You must ensure your company takes training very seriously. Your future likely depends on it.
6) Are cut out for this kind of position?
Commission only work is a little scary, especially at first. Are you willing to take the risk? Are you willing to save for the tight times? Are you willing to force yourself to get out of bed, everyday, and push until the last call of the night? Are you ready and able to fill your calendar with enough appointments to reach your goals? Can you handle rejection, inconsiderate people, rudeness, and stupidity as you swim up a river of “no’s” to find a few elusive “yeses”? When you are done with all that, are you ready to get out of bed the next day and do it all over again?
Commission based positions often offer amazing opportunities. If you believe in yourself enough to take the risk, and you’re willing to do the work, commission is likely the last pay model you will ever be willing to accept..
