When you are evaluating or reevaluating commissions structures, take into consideration the length of sales cycle, difficulty of sale for your product, experience of the people you are hiring, and average commission.
For example, if you are hiring salesmen with little-to-no experience and choose commission only, expect to see a high turnover rate. Or, if you are considering commission-only, double check the length of your sales cycle. You don’t want your new employees to wash out because the sales cycle takes a month or two.
Little hiring risk. You aren’t investing a ton of money into someone if they end up showing poor sales skills. The people who do poorly will weed themselves out and you can often avoid firing people for poor performance. If they don’t close, there is less loss to you.
You only pay for results. Depending on your commission structure, commission-only sales people will not cost you more than they are bringing in. New hire costs aside, a commission-only structure quickly weeds out the people who would otherwise find something to do to look busy and collect a paycheck.
You will not attract the best people. With exceptions, salesmen willing to work on commission only typically come with little-to-no experience. Experienced salesmen know they are directly responsible for a company’s income and expect to be paid accordingly.
Your sales team will only care about the close. This sounds great on paper, but when a small stretch of the truth makes the difference between paying the mortgage that month or not, your salespeople will be tempted to force a fit between your product and your customers’ needs. This can cause enormous problems down the line. You will likely need to provide extra customer support and see higher rates, cancellations, and refunds. It could also tank your company’s reputation.