- Posted by Mark Elliott
- On August 3, 2017
- 0 Comments
When looking at a startup sales compensation plan, many organizations consider a 100% commission plan. Success for startups means growing your customer base and revenue. To do this, organizations need to invest in the sales and marketing effort. This can be a significant cost for a startup as they are growing. A 100 % startup sales comp plan may look attractive, but I think that is detrimental to successful growth. Here are a few disadvantages of a 100% commission startup sales comp plan.
One of the most important roles for a sales rep at a startup is to collect feedback from prospects. There is a range of information that can be collected on use cases, ROI, competitors, priority features, and much more. A 100% commission sales person is less incentivized to collect and share this information as they only get paid on revenue.
The other information that a sales rep is collecting is centred around the accounts, contacts, and sales opportunities. Every startup should be using a CRM and this information should be recorded. Having a rep on 100% commission means that it is actually in the reps best interest to record this information in a CRM. This is counter productive for the sales success of a startup.
Onboarding and Hiring
A recent study found that the turnover for 100% commission reps is almost 100% a year. Think about the impact this has on your business. This means continuous hiring and onboarding for new reps. There is also the lost opportunity from a revenue perspective as your sales team will not be performing.
Is it Less Expensive?
Typically, organizations pay a draw until the commission kicks in. For some organizations, this could mean several months of paying a draw. If the rep leaves early, how easy is it to get this money back? Couple that with the cost to the organization around hiring and onboarding, is it really saving them money?
VA Partners can help your organization build out their sales teams. Contact me directly for a conversation on how we can help.