Commission-only sales can be something of a misunderstood and often misrepresented term. However, the reality of self-employment in the sales world, especially with regards to B2B selling, is far removed from the stereotypes that it sometimes suffers from.
Case in point, when I first made my foray into the employment world at the age of 16, I was told by many in my family that I should not apply for commission-only jobs. I was taught that they were unreliable as an income stream. I was told that if I went for such a position, "make sure it is a salary plus commission."
Commission was seen by many people I knew as a little bit of change on top of your salary. Is this the reality or can commission only roles be just as, if not more, rewarding as salary based jobs?
Pro's of commission-only sales roles:
- Unrestricted financial freedom and work-life balance
- The ability to build a diverse and lucrative sales portfolio
- The satisfaction of being your own boss and running your own company
- The ability to satisfy your entrepreneurial drive
- Not being subject to the constraints of being a company employee
- The sales industry is cut throat and the risk of losing your job is ever present. Being self-employed means you don't answer to anyone apart from yourself
Con's Of Commission-Only Sales Roles:
- It takes drive and dedication to work on your own merit
- Starting your own business requires you to learn other business related tasks such as being responsible for paying your own taxes etc
- Giving up a regular salary when starting out can be scary
- Not suited to people who require working in a team environment to stay motivated
What is a Commission-Only Sales Job?
A commission-only sales job or independent sales opportunities as they are more commonly known as, are in reality a mutually beneficial partnership between a company Principal and a self-employed sales rep/agent, manufacturers rep or sales agency where the agent and company have a contracted working relationship but on very different terms to that of an employee.
Let's explore the benefits of commission only roles.
Income Ceiling. What Income Ceiling?
If you have ever read an ad on a listings website for a commission only job you've probably seen "unlimited earning potential" emblazoned in capitals somewhere in the text. It's true, to an extent.
Many sales positions advertise having unlimited earning potential but, in reality, do have a cap. The hiring company generally tends to offer equivalent incentives to distract from the earning levels they top off at.
So can sales agents truly achieve an unlimited income? Yes, but most times, this will not be achievable whilst you work for one company and are restricted to selling their products exclusively.
Those who hold the key to truly unlimited income are independent sales agents. Where a sales agent working for a company can reach large 'uncapped' commissions up to a point, their earning is limited by the company they work for and are enforced by the contracts they sign. It's important to remember that independent sales representatives are not employees but instead operate independently and achieve truly uncapped potential by building a sales portfolio consisting of multiple products and services that can be up/cross-sold into their networks.
Incentives Or A Diverse Sales Portfolio?
The question here is quite simple: Do you value the safety net of incentives as a company employee, or the financial rewards that come with self-employment and having the freedom to build a diverse portfolio?
If you answered the former, it's more likely that you may not be quite ready to take the plunge into self-employment yet. And that time might never come for you either which, by the way, is completely fine. Self-employment isn't for everyone, whether that's starting your own company within the sales industry or any other industry.
Employees are able to enjoy enjoy the safety net of a regular basic wage, benefits and other incentives. Perhaps you are given a company car, paid for holiday or sickness leave. Obviously being self-employed you are responsible for all of those things and giving up the security you may be used to can be a scary thing to do.
However, whether we are talking about starting out within the sales industry, or any other industry, it's exactly the same. No company owner is paid by someone else to realise their dreams of financial freedom and work/life balance - if there was, we'd all be doing it.
But self-employment sure isn't an easy route to take. You'll have your ups and downs and it takes the right kind of person mixed with focus and dedication to get over the initial struggles of going it alone.
When you work for a company as their employee, you open yourself up to a literal cap in your potential commission earnings simply due to the fact you will be asked to sign a contract preventing you from selling for any other company during the period of your employment. To countenance this, companies sometimes offer their sales agents a range of benefits (holiday, sick pay etc) alongside this, your employer may also offer the chance to win prizes, trips and earn awards when reaching stipulated sales targets.
On the other hand you could be all about....
The Rewards That Come With Being An Independent Sales Rep
The other option is to break away from the financial constraints and set protocols that come with employment and start your own business working as an independent sales agent.
The big difference between independent sales reps and employed sales agents is entrepreneurship and possessing a strong desire to earn more than employees. ISRs are extremely entrepreneurial and aren't interested in merely trying to meet targets set by their employer, they are constantly looking for opportunity and strive for more.
This is made possible simply by the fact that ISRs take a percentage on the back of each sale and in most cases, companies that truly understand how independent sales reps work will be happy for you to include their products and services in your extended sales portfolio.
Independent sales agents are able to justify taking these risks on a potential steady income because the majority of reps who make the decision to break away from the constraints placed on them by employers have many years of industry experience and have built up a solid understanding of the way in which their target industry works as-well-as in many cases, having a list of contacts that they know can be utilised. In this way, their experience far outweighs the risks.
There may come a time when you decide you want a change of scenery. If you are an employed agent, the process of change involves handing in your notice and looking for a new employer. This can obviously be tedious and unsettling at the best of times.
As an Independent Sales Rep, you open yourself up to a multitude of opportunities without restriction on where or who you choose to work with. You are your own boss and can choose to work in partnership with any company in any industry. This gives you the flexibility to choose your own working hours and also diversifies your portfolio. Thus, you enhance your own standing within the industry.
Of course, not everyone feels as entrepreneurial as ISRs and decide to stick to employment. This article is not designed to make you choose one side or another, or even suggest what's right or wrong, rather, it's purely been written to help you to understand the pro's and cons of both sides.
Help us dispel the myths about commission only sales by sharing your own journey in the industry in the comments.
Credit given to Sabian M Muhammad for contributing to this post