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Neil Patel here for another Q&A Thursday video. I’m here with Adam LoDolce from https://viewership.com/.
This one’s from Jason Valasek, and he wants to know what compensation structure looks like for commission salespeople vs. task-oriented people and how to blend in 1099 contractors.
With commission-based salespeople, typically the best salespeople are the ones who get a base. Yes, you can do commission only.
In general, is if you pay your salespeople a base they’re much better off than if you only pay them commission. So look for salespeople that are experienced. They’re hungry, not too experienced and when you look at their base plus commission. In general, when you look at your whole sales department because there are other costs. There’s a VP of sales, and there may be a Sales Director.
You may have some of your fulfillment people or other people within the organization having to help the salespeople close some deals. In general, whatever you’re closing in revenue, sales should not cost you more than 10%. If it starts costing you more than that, it’s just going to eat away at a lot of your margins. Which means you won’t be able to provide amazing results or invest as much in products or services.
You’re in business, whether you like it or not, to also make a profit. I’m not saying you shouldn’t pay people well because you have to keep in mind that without the people on your team, you will not have your business. The people on your team will determine how good or big of a company you build. Elon Musk doesn’t build Tesla, and it’s all the people around him. Yes, he’s smart, but it’s the team that has helped him get to where he is, more than just himself.
I learned that from Richard Branson, we were speaking at a conference together and he’s like, “It’s all about your team. You’re not gonna “build anything big without an amazing team.” So, pay them well. That’s why I recommend you don’t do commission only, and you pay them a base. They’re much higher quality sales reps, and in general, your total compensation for your whole sales department should be around 10%. If it’s lower than that, increase it. Treat them right. If it’s higher than that, you need to figure things out.
Because you need to invest in product, support, engineering, software, what other divisions you have, and still have a healthy profit margin so you can take that money, provide amazing perks to your team members. And of course, you can also use that cash to expand more, dump it into marketing and growth. So, that’s how I look at sales. As it comes to other tasks, I don’t look at it as “Hey, here’s how I pay my contractors. “Here’s how much it should be.”
It’s not about just getting the cheapest people in Upwork, it’s about getting the people who are qualified, and you’re getting a good bang for your buck, so you need to look at quality and price and have some balance there. And just make sure that, whatever you’re paying, it’s worth it for you. And then, after a while it may get so expensive, you’re like wait if I just hired someone full-time it would be cheaper, and that’s when you need to start moving people into being in-house within your office versus just being virtual and contractors.
Steve Jobs always said when you’re hiring people, it’s not about hiring people who have the best resume It’s about hiring people who are hustlers, people who just hustle hard and get stuff done and are passionate because if someone’s passionate, they’re willing to put in the time, the energy, the hours, whatever it takes to succeed and accomplish their goals. And they’ll be there for the long haul versus someone who keeps hopping around every six months or every year looking for a new job.
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