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Common Questions and Answers
Most sales jobs use one of three compensation strategies: a base salary only, a base plus commission, or a commission only compensation plan. Companies love pure commissions compensation because they only have to pay salespeople based on the amount of revenue they bring in. This is especially helpful to companies when the economy is down or the market is depressed for some reason.
On the other hand, commissions only jobs usually pay more than base or base plus commissions jobs IF the salesperson can sell well. That’s why top-tier salespeople love commissions only jobs, while inexperienced salespeople hesitate to take such jobs. If a new salesperson ends up in such a job, her uncertainty could also have an effect on her performance, making it harder for her to sell — and causing her to become even more anxious. But if a commissions plan is fair, then even an inexperienced salesperson can do well in such a job — no anxiety needed.
The key to thriving on commissions is proper planning. Every sales job will go through up and down cycles. One month a salesperson will bring in a ton of new business, while the next month he might struggle to close any sales at all. So the larger the commissions component is in your salary, the more important it is to plan ahead and save money during the good months to cover expenses in the bad ones. If your job pays commissions only, smart budgeting is almost a requirement to survive.
You can start by sitting down and adding up all your regular monthly expenses. Start with fixed expenses, like rent and loan payments. For expenses that vary from month to month, like utility bills, look at your past few months’ bills and pick a number that’s on the high side of average. It’s better to save a bit more each month then to find yourself unable to pay your electric bill during a lean month! And keep in mind that some bills will fluctuate according to the seasons. For example, if you have electric heat, expect that bill to shoot up during the winter months.
Once you’ve come up with a grand total for your monthly expenses, pull out your compensation plan and calculate how many sales you’d need to make in order to bring home enough money to cover those expenses. For example, if your monthly expenses total $5,000 and your job pays a $1,000 commission per sale, you’d need five sales per month to break even.
If the numbers add up, you still need to develop a savings plan so that you don’t spend all your money on successful months and then end up with nothing in the bank during dry spells. During any month when you make more than your minimum for expenses, take at least part of the extra and set it aside in a “rainy day” account for slow months or for emergencies.
On the other hand, if you discover that the number of sales you’d need to make is simply not a possibility, you need to make some major changes immediately. Either find a way to drastically cut your expenses, or find a sales job with a more generous compensation plan. And before you do take another job, do this calculation again and confirm that it will pay enough for your needs.
If you’re fairly close but aren’t quite making enough to get by, it’s time to take a look at your sales process. You might be able to salvage the position by sharpening your skills a bit or adopting a different approach. Start by looking at where in the sales cycle your numbers are dropping. Do you have a hard time getting appointments? Either make more cold calls or re-write your cold calling script. Do you struggle to convert prospects to customers at the appointment? Take a hard look at your sales presentation.
Pure commission jobs are often more independent than base or base-plus-commissions ones because the company knows it won’t have to pay you unless you produce. That’s another reason why experienced salespeople often prefer these jobs, but it can make things even more unnerving for a novice. But once you’ve mastered the art of budgeting, you’ll be far more comfortable in such positions.
About the author
My first sales position was a summer job selling vacuum cleaners door-to-door. I continued through a variety of sales jobs ranging from retail sales for a storage company to selling bank products for a Fortune 500 financial institution.
As a small business owner, I now focuses on selling for my own company, Tailored Content, a website content provider. I write on a wide range of topics but my primary focus is sales and how to sell effectively.