Commission only sales jobs often come with the allure of unlimited earning potential and the promise of flexibility, but for many sales reps, these end up being empty promises.
For companies, hiring commission only sales reps is a strategic move to minimize financial risk and incentivize high performance. But what’s often overlooked are the significant challenges and downsides that these roles can pose for sales representatives, even for the experienced sales reps. Especially in our current economic conditions.
Before applying for a commission only job, take a few minutes to read through our article and see why this may not be the best move. I know times are hard and finding jobs are tough, but having a job that may put you behind the blackball may make things much much worse.
Key Takeaways:
- Commission-only sales jobs offer the potential for high earnings and flexibility, but also come with challenges such as income stability and self-motivation.
- Employers gain from commission-only sales roles, saving on fixed salaries and paying only for closed sales. They may also be able to recover earnings through call backs if goals aren’t met or if customers cancel. Check the contract/offer carefully!
- There is no guaranteed hourly or salary pay and most of the time there is no draw vs commission. You are totally on your own financially (living, business expenses, etc.) until you make a sale.
- To succeed in commission-only sales jobs, it is important to continuously build a strong sales pipeline, hone negotiation and closing skills, and stay updated on sales techniques.
What Are Commission Only Sales Jobs
Commission only sales jobs are sales positions where sales agents normally work as a 1099 employees, earning a commission for the sales they make in their assigned area. Often, they are considered outsourced sales reps and responsible for all expenses of doing the job including but not limited to marketing, gas and other travel expenses, leads, and any other expense needed to make the sales.
In these jobs, individuals can control their schedules and focus on sales activities they’re good at and know well. Each agent gets their own territory to concentrate on, which helps them focus and feel accountable for their work.
This setup can create a win-win situation for both the agent and the company they represent, as performance-based rewards motivate them to meet sales goals. However, these sales jobs can and often include income instability due to the lack of a guaranteed hourly or salary rate.
Benefits of Commission-Only Sales Jobs
For the Employer
Commission only sales jobs provide several benefits for the employer including:
Cost-effectiveness: Employers only pay commissions when sales are made, reducing fixed costs associated with salaries and benefits. This can be particularly advantageous for new businesses or businesses with fluctuating sales volumes.
Motivated Sales Force: Commission-based compensation motivates sales agents to perform well since their earnings directly correlate with their sales success. This can lead to increased productivity and a driven sales team.
Risk Mitigation: Since compensation is tied to sales performance, employers transfer some of the risk associated with generating revenue to the sales agents. If sales are low, the employer’s financial burden is reduced.
Scalability: Employers can easily scale their sales force up or down based on business needs without the commitment of fixed salaries. This flexibility allows for quick adjustments in response to market changes or seasonal fluctuations.
Access to Specialized Skills: Employers can attract talented sales professionals who prefer the autonomy and potential for high earnings that commission-only roles offer. This can result in a more skilled and experienced sales force.
Market Expansion: Commission-only sales agents often work on a commission basis for multiple companies simultaneously. This allows employers to expand their market reach without the need for significant upfront investment in hiring and training new employees.
For the Employee
There are several benefits of commission only sales jobs for the employees/contractors as well. These include:
Unlimited Earning Potential: Since commissions are directly tied to sales performance, employees have the opportunity to earn unlimited income based on their efforts and results. High-performing salespeople can potentially earn more than they would with a fixed salary.
Flexibility: Employees in commission-only roles often have more control over their schedules and work environments. They can choose when and where to work, allowing for a better work-life balance.
Autonomy: Commission-only roles empower employees to take ownership of their work and sales strategies. They have the freedom to pursue leads and close deals in ways that align with their strengths and preferences.
Entrepreneurial Opportunities: Commission-only roles mimic aspects of entrepreneurship by allowing employees to operate as independent contractors. This can provide valuable experience in business management, sales tactics, and customer relationship building.
Performance Recognition: Commission-based compensation directly rewards employees for their hard work and achievements. Successful sales outcomes are immediately reflected in their earnings, providing a clear measure of performance recognition.
Skill Development: Commission-only roles often require employees to develop and hone their sales and negotiation skills to succeed. This continuous learning and skill enhancement can lead to personal and professional growth.
Diverse Income Streams: Employees in commission-only roles may have the opportunity to represent multiple products or companies simultaneously, diversifying their income streams and reducing dependency on a single employer.
Who Benefits the Most?
In a commission-only sales job, the benefits for the employer often outweigh those for the employee in several ways:
Cost Control: Commission-only structures allow employers to control costs more effectively. They only pay commissions when sales are made, reducing fixed expenses associated with salaries and benefits. This cost control is advantageous for the employer but may lead to income variability and financial uncertainty for the employee.
Risk Mitigation: By shifting the financial risk of generating sales to the sales representatives, employers mitigate some of the risks associated with fluctuating market conditions or economic downturns. If sales are low, the company’s financial exposure is minimized, while employees bear the brunt of any income fluctuations.
Scalability: Commission-only structures offer employers greater flexibility in scaling their sales teams based on business needs. They can quickly expand or contract the sales force without the burden of fixed salaries, adapting to changes in market demand or growth opportunities. However, this flexibility may result in instability for employees, as their income is contingent on sales performance.
Performance-driven Culture: Commission-based compensation fosters a performance-driven culture where sales representatives are motivated to excel to maximize their earnings. This can lead to higher productivity and increased revenue generation for the company. While this benefits the employer, employees may experience higher levels of stress and pressure to meet sales targets.
Access to Specialized Talent: Commission-only structures attract highly motivated sales professionals who are driven by earning potential. Employers can tap into a pool of talented individuals with specialized skills and industry expertise, enhancing the effectiveness of their sales force.
However, this may result in a competitive environment among employees, potentially leading to turnover or conflict due.
Challenges of Commission-Only Sales Jobs
While commission-only sales roles offer the potential for high earnings and flexibility, they also come with significant challenges related to:
Income Uncertainty: Since earnings are directly tied to sales performance, there can be significant fluctuations in income. During slow periods or when facing tough competition, salespeople may experience financial stress due to lower commissions.
Pressure to Perform: Commission-only roles often come with high sales targets and pressure to meet quotas. Salespeople may feel constant pressure to perform well to earn a sufficient income, leading to stress and burnout.
Financial Risk: Salespeople bear the financial risk of not making enough sales to cover their expenses. This risk can be particularly daunting for those with financial obligations such as rent, mortgage payments, or student loans.
Lack of Stability: Commission-only roles offer little to no stability compared to salaried positions. Sales can be unpredictable, and there’s no guarantee of consistent income from month to month.
Difficulty in Building Trust: Establishing credibility and building trust with clients can be challenging, especially for new salespeople or those selling unfamiliar products or services. It takes time and effort to develop relationships and convince customers to make a purchase.
Limited Benefits: Commission-only roles typically offer limited or no benefits such as health insurance, retirement plans, or paid time off. Salespeople must budget carefully to cover their expenses and plan for future financial needs.
Competitive Environment: Commission-only sales often involve competing with other salespeople for leads and clients. This competitive environment can be intense, especially in industries with high demand and limited opportunities.
Why Being a Good Sales Rep Does Not Guarantee Success in Commission-Only Sales
One of the pro talking points of commission only jobs, is that good rep will do well in commission only sales if they hustle, but this is not always true.
Sales vs. Self-Management: Traditional sales roles typically come with structure, support, and resources provided by the employer. Commission-only sales reps, on the other hand, must manage their time, resources, and efforts independently. This requires a different skill set that goes beyond pure sales capabilities.
Intrinsic vs. Extrinsic Motivation: Commission-only roles rely heavily on extrinsic motivation—earning money through sales. While this can drive performance, not all good sales reps are primarily motivated by money. Intrinsic motivators, such as job satisfaction, career growth, and work-life balance, are equally important.
Lack of Team Collaboration: Commission-only sales reps may work in more isolated environments with less collaboration and support from colleagues. Traditional sales roles often benefit from teamwork, shared goals, and collective problem-solving, which can enhance overall performance and job satisfaction.
Financial Stress of Income Uncertainty: The financial stress associated with commission-only sales can negatively impact a rep’s performance. Worrying about making ends meet can distract from focusing on sales activities and building customer relationships. Unless you have several months worth of living expenses in the bank or a spouse with a high income, this will wear on you.
How to Succeed in Commission-Only Sales Jobs
With all the challenges, there are people that make a lot of money in commission only sales, however, most end up failing [3] within the first year due to financial instability. If you are wanting to try your hand at this adventure, here are some tips to help you succeed:
Have Money in the Bank: If possible, please make sure you have enough money in the bank to cover your normal living expenses and job expenses or be willing to work 2 jobs until you make it. Maybe even consider overemployment until you are generating enough commissions to replace your old income and have some money in the bank to weather the hard times.
Consider Remote Positions: I would look for remote work from home sales jobs since the business expenses could be significantly reduced.
Understand Your Product or Service: Take the time to thoroughly understand the features, benefits, and value propositions of the products or services you’re selling. Knowledge about what you’re offering will instill confidence in potential customers and improve your ability to close sales.
Identify Your Target Market: Focus your efforts on identifying and targeting the right audience for your product or service. Research your target market to understand their needs, preferences, and pain points, and tailor your sales approach accordingly.
Build a Strong Network: Networking is key in commission-only sales. Invest time in building relationships with potential clients, industry professionals, and referral sources. Attend networking events, join industry associations, and utilize social media platforms to expand your network.
Develop Effective Communication Skills: Effective communication is essential in sales. Practice active listening, ask probing questions to uncover customer needs, and communicate the value of your offerings clearly and persuasively.
Set Realistic Goals: Set achievable sales goals for yourself and track your progress regularly. Break down larger goals into smaller, actionable steps, and celebrate small victories along the way to stay motivated.
Manage Your Time Wisely: Time management is crucial in commission only sales, where your income is directly tied to your productivity. Prioritize your tasks, focus on high-value activities that generate sales, and avoid distractions that detract from your goals.
Embrace Rejection: Rejection is a natural part of sales. Instead of letting rejection discourage you, use it as an opportunity to learn and improve. Analyze what went wrong in unsuccessful sales interactions and adjust your approach accordingly.
Seek Mentorship and Training: Take advantage of any mentorship or training programs offered by your company or industry associations. Learning from experienced sales professionals can provide valuable insights and help accelerate your learning curve.
Stay Persistent and Resilient: Success in commission-only sales often requires perseverance and resilience in the face of challenges. Stay positive, maintain a growth mindset, and keep pushing forward, even when faced with setbacks or rejection.
Track Your Results and Iterate: Continuously monitor your sales performance, track key metrics such as conversion rates and average deal size, and identify areas for improvement.
Some of the Most Frequently Asked Questions About Commission Only Sales Jobs
What are the pros and cons of commission only sales jobs for employers?
The main advantage for employers in commission only sales jobs is that they only have to pay their employees when they make sales, reducing their fixed labor costs. However, this can also be a disadvantage as it may lead to high turnover rates and difficulty in retaining talented employees.
What are the pros and cons of commission only sales jobs for employees?
The main advantage for employees in commission only sales jobs is the potential to earn high commissions, especially if they are skilled at selling. However, the main disadvantage is the lack of a stable income, as sales can fluctuate and since these jobs do not provide any hourly, salary, or draw vs commission options; there is no guarantee of a consistent paycheck.
Why do commission only sales jobs benefit employers more than employees?
Commission only sales jobs benefit employers more than employees because they only have to pay their employees when they make sales, reducing their fixed labor costs. The company can also reduce marketing expenses since some of the expenses can be passed to the 1099 sales rep. Additionally, employers have more control over their sales team and can incentivize them to sell more through higher commission rates.
What are some things to avoid in commission only sales jobs?
Employers should avoid setting unrealistic sales goals or commission rates that are too low, as this can lead to employee dissatisfaction and high turnover rates. Employees should also be aware of any hidden fees or charges that may affect their commission earnings.
How can employees make the most out of commission only sales jobs?
To be successful in commission only sales jobs, employees should be motivated, proactive, and have excellent communication and negotiation skills. They should also research the product or service they are selling and know their target market well. Additionally, employees can negotiate their commission rates and set achievable sales goals to maximize their earnings.
So Should You Take a Commission Only Sales Job?
I cannot tell you what to do? I will tell you from my perspective, I would not take a 100% commissioned only sales job where I had to assume most of the risk. It just does not make sense to me and if you take a look at sites like Reddit [1], you will see a lot of people feel the same way. In fact, only 6% of people surveyed [2] would consider a commission only sales job.
Example Reddit Comments
“Unless it’s inbound closing only, I refuse to sell according to this model. In most cases, I’m just doing unpaid business development work. If they can’t give me a salary or retainer with what’s expected for reasonable earnings and revenue expectations, they either don’t know the numbers and need to work with someone to get them or they are hiding real numbers because they’re inadequate. Either pay me cash or equity.”
“Commission only is for experienced & confident reps that have a territory and instead of opening their own company would rather have somebody handle the overhead of a company.”
“it’s often an excuse to (1) not pay (2) get free research (3) offload most if not all risk to sales rep.”
“Yes. They should share the liability unless they’re paying you the difference. A salary or draw doesn’t give them the right to be stingy it’s just assuring you can represent their company well and focus your attention on the sales cycle. I personally wouldn’t want someone out selling my product/services and be in a state of poverty or desperation.”
Resources: (all links will open in a new window)
[1] – https://www.reddit.com/r/sales/comments/13k3cms/commission_only_jobs/
[2] – https://www.quotapath.com/blog/commission-only-sales-jobs/
[3] – https://www.navigarecruiting.com/where-do-you-stand-on-sales-positions-that-offer-no-base-and-are-100-commission/