Introduction
We work within the B2B Tech Startup world, and we frequently run into founders and CEO’s that don’t budget for Sales or Marketing. Either they ran out of money building product, thinking their product will be so good it will sell itself, or they thought that they can start off by hiring commission-only sales reps. In this post, we’ll look at the benefits and disadvantages of this approach, but to put it bluntly, in the B2B tech startup world, there are very few instances where we’d advise it.
First, what do we mean by commission-only sales rep? We’ll take a slightly broader definition than the moniker implies. In our view, we’re talking about any compensation plan for a sales rep that relies very heavily on commissions as the primary form of remuneration, including a below-market salary.
What it takes to be a B2B Tech Sales Rep
There are people who sell paper clips, and there are people who sell fighter jets. Both are valuable contributors to the economy, and they all have our respect. But it’s important to know that their skill sets, experience, training and compensation are very different.
While selling paper clips may seem straightforward, requiring proficiency in both communication and basic negotiation, selling high-value assets like fighter jets demands a far more intricate skill set. B2B sales representatives in the realm of advanced technology must possess not only a deep understanding of their product or service but also an ability to navigate lengthy sales cycles, complex procurement processes, and often, intricate technical specifications. B2B sales reps must excel at what is known as the Complex Sale—where multiple individuals within the customer, with different priorities and goals, must be aligned. Mastery of consultative selling techniques, the ability to build and nurture long-term client relationships, and a keen aptitude for strategic problem-solving are essential traits for success in this arena.
Moreover, the level of experience expected from B2B sales reps in the tech sector far surpasses that required in more traditional sales roles. While an office supplies salesperson may thrive with only basic sales experience and product knowledge, those selling high-tech solutions must typically demonstrate a track record of success in B2B sales, often coupled with a deep understanding of the specific industry they operate within. This expertise is not acquired overnight but rather through years of honing one’s craft, continuously adapting to evolving market dynamics, and staying abreast of the latest technological advancements and industry trends.
Training for B2B sales reps in the tech sector is also markedly different from that of their counterparts in more conventional sales roles. In addition to foundational sales techniques, such as prospecting, qualifying leads, and closing deals, these individuals require specialized training in areas such as product knowledge, competitive positioning, solution-based selling methodologies, and navigating complex decision-making hierarchies within client organizations. Ongoing professional development is paramount, as technology evolves rapidly. Staying ahead of the curve is essential for maintaining a competitive edge in the market.
In short, a good B2B tech sales rep is a highly trained, experienced master of several different complex skill sets that don’t frequently inhabit the same human. They’ve honed their skill sets over years of leading complex sales cycles. If they are good, they are worth a lot—and they know it.
Commission-Only Sales Reps Explained
Commission-only sales reps operate on a straightforward principle: they are motivated solely by the prospect of earning commissions based on their sales performance. Often referred to as “coin-operated,” these individuals thrive in environments where their earning potential is directly tied to their ability to close deals. The absence of a base salary means that their income is entirely contingent upon their sales success, making them inherently driven and results oriented.
While the lack of a guaranteed base salary may seem daunting to some, there are some benefits to employing commission-only sales reps. Without the safety net of a base salary, these reps are motivated to maximize their earnings potential, often resulting in heightened sales activity. Their hunger for money can translate into a proactive and aggressive approach to prospecting, pitching, and closing deals, driving revenue growth for the organization.
However, it’s essential to consider the motivations behind choosing a commission-only compensation structure. If a sales professional possesses high-value skills and expertise, why would they opt for a 100% commission model when competitors offer a base salary? One possible explanation is that they are indeed hungry for success, willing to forgo the security of a base salary in exchange for the potential for higher earnings. But, in our experience in the B2B tech space, it’s worth examining whether the absence of a base salary reflects a lack of opportunities. They may not be the cream of the crop.
Is a Commission-Only Rep Right for you?
One significant concern associated with commission-only sales reps is their lack of loyalty to the organization. Without the security provided by a base salary or benefits package, these reps are frequently more inclined to seek out better opportunities or easier products to sell elsewhere. A rep might think that if you’re not loyal enough to them to pay a competitive salary, why should they be loyal to you?
This transient nature can pose challenges for companies investing in training and onboarding new sales reps, as the risk of turnover remains ever-present. Thus, striking a balance between incentivizing performance and fostering employee retention becomes crucial in maximizing the long-term effectiveness of commission-only sales teams.
If your company sells paper clips on a transactional basis, commission-only sales reps may make sense. But, if you sell a technical solution to businesses, this requires a much more unique skillset, a proven track record of success, more training and a longer ramp-up. Sure, there are exceptions—and we’ve made them ourselves—but we generally feel this model doesn’t belong in the B2B tech space.
We have rarely seen B2B startups succeed with commission-only sales reps. Instead, they burn through your time and resources at a critical point in your evolution.
The Oft-Overlooked Needs of a Sales Rep
Sales reps are sales reps; they are not marketers. The two are not the same. Many founders confuse these two, or they believe they’ve already done the proper marketing homework to enable a sales rep to be successful. What they don’t understand is that effective sales reps in a complex sale need to have a solid, fully tested marketing foundation to work with.
Specifically, the problem/solution/value statement needs to be clear and crisp. ICP and Target Personas need to be properly identified and fully tested. Think how difficult it would be for a commission-only rep to spend 3 months working to get into a large company, only to learn that his solution really doesn’t fit the prospect’s industry. That’s a lot of wasted work for $0 to the rep because the startup didn’t do their homework.
Messaging needs to be identified and fully tested. Sales collateral based on the above points need to be developed, and here’s the kicker—leads need to be generated. Let me restate this—in the world of complex sales, Marketing is responsible for generating leads for the sales rep. And these leads need to be well-qualified, not just a list of people that filled out a form or attended a conference.
Marketing is not primarily commission-based work. So, if you want someone that will do all of the above and still has mastered the complex sale, and they are willing to do it for commission only, then you may want to stop and think about how good they really are at their craft.
Conclusion
It is not our intent to denigrate the Commission-Only Sales Rep. These are hard working individuals, and they have their valued place in the economy. But there are very few cases where we believe they belong in a B2B Tech Startup. Again, we’ve done it, but those instances are primarily limited to situations where all the marketing work has been done properly in advance, and the sales cycle is straightforward and relatively short (2-3 weeks). Otherwise, we’d advise against it.
As we always point out—there is a way to get more bang for your buck—the fractional revenue team where you get part-time marketing, sales and customer success in whatever quantities you need each week.
If you’d like to discuss, have questions, or want to learn more, please feel free to reach out.
