Ultimately, Commission is Why We Do What We Do

Many commission plans are confusing, so it is especially important that you ask (and re-ask if necessary) to have the commission plan clarified for you.

Why do we make countless cold calls and adapt to new technological means just to earn ourselves the opportunity to be told “No” day-in-and-day-out?

For most of us, being a professional salesperson is a means to an end. For most of us, it is how we are able to maximize our financial opportunities.

What do we do if we find ourselves feeling underpaid?

After reading through a recent “Chat” session between a customer and a teammate, I decided to explore a salesperson’s pay from the eyes of the salesperson.

My own experience as a salesperson who felt massively underpaid furthered my desire to explore this common topic.

Unfortunately, this situation often occurs with newer salespeople as there are about as many commission structures as there are companies.

Newer salespeople are just excited to get started in their new job likely after recently reading a couple of sales books or listening to a few sales podcasts.

They just want to start pounding on doors and dialing those soon-to-be worn out phones. Likely they feel as though it is a “red flag” to ask for details of their compensation plan, so they fail to ask for clarity.

Many, like myself in the past, end up regretting that choice.

Five Questions to Clarify Your Commission Plan:

1. Do you understand how and when you get paid?

   You must understand this before you agree to join a new company. If you do not understand, ask. If you are already employed and do not understand, ask.

2. When is a deal considered “Booked?”

   You must have this defined. Is the deal booked when the customer signs the contract or when they make payment? If you do not know, ask.

3. When is a deal considered “Earned?”

   Again, you must have this defined. Do you earn a deal once you receive full payment? Do you earn the deal once the job is completed? Some large complex deals are not complete for more than a year after booking. How does this affect the timing of your commission payment? If you do not know, ask.

4. When do you get paid?

   How long after the deal has been booked and earned do you get paid? If you do not know, ask.

5. Where can I view this in “real time?”

   You should be able to look at a calendar and know for certain the date you can expect a commission payment. DO NOT allow for uncertainty. This is how you support yourself and your family. Uncertainty is unacceptable.

6. What is my commissionable value?

   Do not leave this to fate. It may seem like you need to be an accountant to understand how to determine your commissionable value, but you do not. You simply need to understand the gross product, your commission rates on products and services (if separate), while deducting applicable sales tax rates.

   Example: You sell $100,000 worth of products and $25,000 of services to your favorite new customer for a total of $125,000. With $10,000 of sales taxes the total charged to your customer is $135,000. If you receive 10% commission on products and 20% commission on services you would be due a $15,000 commission check. Of course, these numbers round up nicely, but with a calculator anybody can do this math. This is your livelihood, so get out that calculator on every deal.

Why to Ask About Your Commission Plan

Being a salesperson is a challenging profession, but it can be a very lucrative way to earn a living.

However, it is exceptionally important to have clarity on how you are rewarded financially. Admit it, you do not spend all day, everyday taking those “NO’s” for fun.

Anybody that is looking to join a new sales team must be crystal clear on how your efforts will be rewarded.

Many commission plans are confusing, so it is especially important that you ask (and re-ask if necessary) to have the commission plan clarified for you.

Even if you are already working as a salesperson and still do not understand your company’s commission plan, ask for clarity.