Sales jobs that pay pure commissions only, and no salary, are popular with many companies. Management teams reason that with this compensation plan, the salesperson is being paid for exactly what he produces, no more and no less. So if a salesperson closes a lot of sales, he'll make a lot, and if he doesn't, the company won't be paying him.
This line of reasoning explains why many salespeople, particularly inexperienced ones, don't want anything to do with a pure commissions job. It's unnerving to know that you can literally starve if you don't bring in enough sales, and the panic caused by that line of thought makes it much harder to sell successfully, causing a vicious cycle of failure. The truth is that any competent salesperson can be very happy – and make a lot of money – in a pure commissions job, even if the salesperson is inexperienced. The key to thriving on pure commissions is proper planning.
Your Sales Pipeline
Every sales position tends to go through cycles of “feast-or-famine.” Monitoring your sales pipeline will help you to control this cycle, but you'll still tend to have months where you make tons of sales and other months where every sale seems to fall apart right before closing. So if you're on a pure commissions plan, you MUST set aside some money from your “feast” months to help you pay for necessities during the “famine” periods. Keeping a tight financial ship is important in any job that includes commissions, but it's ten times as important when commissions are all you bring home.
Before You Start the Job
Sit down and add up your monthly expenses. Write down the total of your fixed expenses and add in a bit more than average for your non-fixed expenses. For example, if your electric bill ranges from $50 to $100 per month but is usually about $60, put it into your budget at $75. That way you won't run into trouble if you have a relatively expensive month combined with a low commission check.
Once you've come up with a number for your monthly expenses, take a look at your commission plan and calculate how many sales you'd need to make each month to cover those monthly expenses – then add in a few more sales to pay for the inevitable emergencies, like the car that breaks down or the dog that needs expensive vet treatments. Is the minimum number you've calculated an achievable number of sales for an average month? If not, this job is a bad fit for you! Turn it down and look for one that either offers higher commissions or has a base salary you can live with.
Covering Lean Months
Assuming you're happy with your minimum calculated sales, you'll still need to allow for the occasional sales slump in your planning. If you don't already have one, set up a savings account at your bank. Then when you have a particularly successful month, tuck away some of your earnings into that savings account for a rainy day. Just having some money set aside for emergencies will make you feel more secure, which will help you to relax and enjoy your job.
Do Your Sales Need to Improve?
If you're already in a pure commissions job and are struggling to make enough to get by, you can improve your situation by analyzing why your sales aren't happening. At what point in the sales process do you lose the prospect? Right at the beginning, because you don't have enough leads? Then track down a new lead source or hire a list broker. Are you doing tons of cold calling but not making many appointments? Take a look at your cold calling approach and add in a good opener or some catchy benefits. Pure commission jobs are often more independent than salaried ones because if a company is investing a salary in you, they will also want to manage you pretty closely. In a pure commission job, you'll need to take responsibility for managing yourself, which is precisely why many experienced salespeople love pure commissions roles.