I am just starting my business, and because of my busy time at work, I can only manage the main aspects of the business, so I decided to hire a business development/sales executive to go and propose clients about our services. Here is the question: Do you recommend hiring this person as a full-time employee (salary based)? Or I should be hiring based on a commission of each sale transaction/client lead? Or a combination of both. Obviously, I don't want to endure too much costs at the beginning but i also want to start right.
Hiring is fine if you can afford the cash flow outlay now.
Remember, no one will ever care as much about your business as you do.
At this stage, a combination of base plus commission is likely to work best. You want that base to be just not quite enough for the hire to pay their monthly bills; ideally, you want them motivated to go get the sales.
If you pay them enough to be comfortable, they will stay comfortable.
So the base shows you are serious. However, it does not let them wallow in complacency...which they will be tempted to if you let them because it's not their business.
You will attract better candidates because of the base. Make the commission hefty, say 30% of the project revenue. Perhaps 50% if the numbers work.
The risk tolerance of commission-based salespeople is very close to entrepreneurs. This is important to keep in mind, because if the reward system doesn't keep them hooked, they will realize they could eliminate you as the middle man and keep all the money themselves--which accounts for high turnover in many commission salesperson-based operations.
Also note that once you set a remuneration structure, it is dangerous to change it. Even alterations that result in the salesperson making more money than they were prior will cause some experienced staff to get angry and quit.If and when you do want to look at changing commission structure, have the salesperson/people participate fully in the process with you. So do your best to get it right this first time. Next time you touch it, there will be consequences.
Develop a sales plan with your hire. The numbers need to support the revenue you and the salesperson have in mind. These numbers need to be believable and achievable, not pie in the sky. Each person has their own money tolerance, which is your belief of what is "a lot of money". Check for this: there's no point in hiring an individual who has a low money tolerance and thinks $500 is "a lot of money" if the deal sizes are $10K+ and on-target annual revenue for the salesperson is $200K.
If you want to discuss your situation further and set up a specific plan that avoids the pitfalls and gives you the best chance of success, you know where to find me.
Answered 7 years ago
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