Let’s say you’re really far along in creating your business model. You understand exactly what your customers’ needs are, and you’ve crafted an outstanding value proposition for them. After a long decision-making process, you’ve decided that the best course of action for your business is to dive in with both feet and sell to your customers directly.

You’ve also decided that you’re not going to sell through your website, or rely on something passive like a kickstarter campaign. You’re actually going to hire people.

Hiring a sales staff is a big step. It’s time to ask yourself a big question: “How much will I have to pay in order to set someone else to sell for me?”

When it comes to retaining salespeople, you have three options for compensation. Thankfully those options are pretty simple, and easy to explain.

1. Commission only: Under a commission only plan, the salesperson doesn’t get anything unless they make a sale. It’s entirely performance based, also known as “Eat what you kill.” These usually have high commissions, and can be very lucrative for a skilled sales rep. As an employer, this kind of arrangement can be great for keeping a low overhead. Many people aren’t comfortable with a commission-only plan, which limits your pool of potential sales reps. Commission-only employees are also less tied to the company than a salaried staffer, and they have little incentive to stick around through tough patches. Any investment you make in their training or sales support tools goes with them when they leave.
2. Salary: By offering a salary, you have a much bigger pool of potential employees. Not having commissioned salespeople can be a powerful marketing tool, as it suggests that those sales reps have less reason to use high-pressure tactics. On the other hand, those reps have less of an incentive to make the sale and it will swell your overhead expenses. You’re paying them to show up, sale or no sale.
3. Commission-plus-salary hybrid: This is the most popular approach, and for good reason. By offering both a minimal salary as insurance against lean sales periods, plus a commission, the rep gets the best of both worlds. As an employer, you still have big pool of potential employees to pull from, and less risk that they’ll bail on you if they hit a rough patch. The commission is lower than a commission-only arrangement, but substantial enough to act as an incentive.

What works best? That will depend on the nature and maturity of your business. What might make sense for a young and scrappy company flying by the seat of its pants might not work for an established company with a large client base who value continuity from their vendors.

I’ll be talking about the activities required to generate sales, and some methods for managing your sales activities, in part six.