During the past two weeks, I had the chance to consult with two CEO/entrepreneurs. They’re both in the tech industry just coming up to the point where they are looking for focused sales resources. These are start-up situations.
They have been interested in commission only salespeople since they have limited cash resources.
But, based on my experience, it’s not a great strategy, certainly in these two cases. I’ve seen some real successes using this model and some real catastrophes as well.
Although I didn’t interview the candidates, they were 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 astounded.
This is what I instructed the CEOs to do:
The majority of 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 in the past on overcoming pressing problems that spawned when they counted on these independent reps to deliver revenue at predictable levels and timeframes, and they failed. Targets were missed, investors got anxious and valuation dipped…
Many of these commission-only people are gifted, dedicated, and work hard. But they are self-employed and money is their main goal. 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 knowledgeable of. They know those five products, their strong points 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 is unique in the market,” said one of the CEOs. He does. It’s quite disruptive, and the CEO was able to explain in very compelling terms the financial value this product would provide his future customers. But getting an independent rep to sell a brand new product, with no references, is a missionary sell. Time-consuming, annoying, and unpredictable in results.
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 to 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 impact in any cash the company has.
About the Author:
Dave Stein is a successful sales coach, and consultant. He focuses his attention on hiring of top sales professionals, development of corporate and selling strategies to overcome tough competitors, and more. Dave Stein is also a successful writer and recently co‐authored of Beyond the Sales Process: 12 Proven Strategies for a Customer‐Driven World.
Disclaimer: The views and opinions expressed in this article are strictly those of the author. CPSA does not endorse any of the companies, products and services mentioned within this article.