What is the Best Remuneration Package to go for?
We, as Self-employed sales professionals have already decided to work on a results formula. In return of course for an at least double share of the profits and with the freedom and independence to operate how we wish. Self-employed deals are often more involved than the traditional employee remuneration schemes. What is best for you personally is determined by a blend of the sector, product, timescales, cashflows and margins and your personal goals.
Self-employed sales professionals think like entrepreneurs. This often means they are more focused on the medium, to long term. It also means that they want to own the portfolio rights to the business they bring in.
The company is effectively offering a franchise business, without a franchise fee to fund the recruitment, training etc. The Self-employed person is a business owner and as such requires at least double for the same results of a traditional sales employee. Not paying a basic and even better not providing an office reduces the risk to a company considerably. In return their expected profit per person is greatly reduced, which they address through volume of Sales Associates.
But there is much more to it than that.
A self-employed sales team needs less supervision and motivation. They are also thinking like business owners building an asset. This means that once started they rarely leave for other opportunities.
Timescales, Size and Volume.
For many opportunities, it is practical, in week one to make sales and therefore produce income. Often low-level purchases but needing a personal contact. At the other extreme there are products that can have a 9-12-month time lag to cash receipts. Usually, one off large sales with a very high commission. Then there are products that are paid by subscription. Very popular as it requires a low-cost entry level to sell a prospect, but the overall sale size over time can be quite considerable.
All of this will affect the timing on your income. You must decide how important is short term income against the building of a long-term passive income.
Then there is margins to consider. Some products like cars for example have very small margins. Others like software can have a margin of over 90%. As a rule, you are always looking for something with a reasonably high margin, say at least 30% depending on the size of deal and potential for further orders.
Now let us look at the different elements that might comprise a quality and lucrative remuneration contract.
Often there is three grades of self-employed associate. To lock in and give status to those that succeed you may be offered a commission scheme that rises something like below.
- 25% (of margin) on starting as Consultant (Designate)
- 40% on closing on just 2 deals now Consultant.
- 50% on first 5 deals Senior Consultant.
In another situation the above is reversed. The commission is 25% on each deal, but there is a front-loaded double commission say for first three months to compensate for low wip and to motivate a new person to urgency. This can be very attractive if reaching a minimum income in the first 3 months is important.
Sign Up Fees
There might be a flat sign-up fee for each new customer brought in.
When there are subscriptions, or even repeat orders. The portfolio rights can be given to the Sales Associate in different ways,
- Ongoing forever. This means that they can sell their portfolio on leaving to the company or to another Sales Associate.
- Front Loaded Terminal. This means they say receive double commission on first 3 months and then normal for the next 12 months.
- Year 2 and forward commissions remain but halved. Ends year 3.
Which you prefer depends on your goals, financial situation and the nature of the product being sold.
Fast Track Bonus:
There is a Bonus perhaps of £1,000 for five appointments made in month 1. Started after training. It is expected everyone who puts in the work will receive this. This is to inspire urgency from day one.
A Retainer payment is available on an individual level against work in progress.
Another option that comes up fort those wanting to help train and direct a self-employed sales time is the override. Usually a percentage of sales on those that are being trained etc.
In Success Moves Sales we calculate an earnings matrix showing the expected income over the short and long term for a below and above average performer. This will show the pattern of income as well as the potential size.
So, which should I go for?
Firstly, if reading all of the above you still would prefer to have a basic salary, a comfortable 9 to 5 job then clearly self-employed sales is not for you. This could make sense if you are new to sales and need experience and a tack record to give you the confidence. Secondly that high income with independence is not your top goal.
If a company is a start-up or less than a year old, they will be higher risk. This could be a great opportunity if you pick the right one and get in early on to something that is going to be big. In this scenario at interview look for them to sell you on the potential of the business. You may prefer a small growth company to a larger established one, it is all a matter of personal choice, values and goals.
A key piece of information on deciding can be the time cycle to a deal. If you are selling aircraft for Boeing there can be a long wait for commission, so you need elements in the formula that pay on work in progress. On the other hand, if you are selling something that is usually bought following one phone call you could earn multiple commissions on day one and the commission rate becomes more important in the balance.
Overall, the money, for most of us is the most important, but you need to consider all the factors with reference to your goals. Key questions that must always be asked are:
- What training do you provide?
- What sales and administrative support is there?
- What Lead Generation is there?
- What Marketing will I benefit from?
- Is there a Sales Manual, presentation pack, demonstrations I can use?
- What did your highest earner make last year?
The real advice is to know your personal goals and at interview ascertain if the company potentially offers you a path to achieve them.