The possibility of an uncapped paycheck can entice people to
commission-based jobs. Although the prospect of earning big money in one
"good" month can be tempting, there are risks involved in making the
switch, especially for folks accustomed to a steady paycheck.
Mike Little, a 45-year-old sales representative at a packaging label
company in Fort Worth, Texas, has seen his life savings depleted four or
five times in his 23 years in sales. "Your rewards can be huge but the
risks can be just as big," he says.
The inconsistent nature of working on commission doesn't suit
everyone. Here are some tips for those considering the switch:
1. Evaluate Your Personality
Working on commission requires establishing relationships, massaging
deals and building trust with clients. In order to be successful, it
helps to be a "people person."
"Introverts will not succeed on commission," says Rick Gold, vice
president of Strategic Workforce Solutions Inc., a full-service search
firm in New York. "Clients don't necessarily do business with me because
I'm the best recruiter ever, it's because I build relationships and
trust," he says.
Work ethic, self-motivation and a thick skin are major requirements
to succeed on commission.
"If you're not disciplined, commissions could be a disaster for you,"
says Mike Humphrey, 55 years old, vice president of Bailey Insurance and
Financial Services in Waco, Texas.
John Vosilla, a real-estate agent for Our Island Real Estate in
Staten Island, N.Y, agrees. Mr. Vosilla, 49, says a regimented schedule
is fundamental to working on commission even though a supervisor isn't
enforcing it. He works five to six days a week from 10 a.m. to 8 p.m.
and says he is reluctant to vacation until he builds a network of
referrals.
Debby Stone, founder of InterVision Group, LLC, a leadership and
career coaching and consulting firm in Alpharetta, Ga. says she
evaluates how goal-oriented and resilient clients considering
commission-based jobs are. She says that candidates must be
self-motivated and able to bounce back after hearing "no."
2. Manage Expectations.
Although an optimistic attitude is important, your expectations when
first starting out should be sensible.
"It could take six months before you close your first deal," says Mr.
Gold. He suggests saving up a nest egg of at least six months of salary
before making the move to support yourself while you build a network of
clients.
Mr. Vosilla didn't receive his first check for seven months and says
it is important to consider the lag time of sales. In real estate, it
could take 45-90 days for a closing.
If you are unable to save, another option is to try to work for a
company that offers a draw, where the firm fronts money for you to live
on which is then repaid once you start closing deals.
Mr. Little set up a "guarantee" with his new company. While he gets
established and brings over former clients, they reimburse him with
checks that would equal a $55,000 salary. Once he brings in his own
deals and is able to make at least $55,000 in commission, the checks
will stop.
3. Create a Budget.
Setting a budget can ease your transition to fluctuating paychecks.
"There are some months where I'm living like a king and other months
that I'm just getting by," says Mr. Gold, who tries to put at least half
of every commission check into an investment account.
In order to survive on commission, you have to be wise with the big
checks and make the small checks stretch. Mr. Humphrey and his wife
created a budget early in his career. He says it can be tempting to
splurge when a "monster check" comes in, but he says he puts the
smallest, conservative amount in his checking account and saves the
rest.
"I've had a couple of months with negative commission statements
where I actually owed the company money," says Mr. Humphrey, who relied
on his savings to get through the tough times. He also avoided long-term
financial obligations such as mortgages and car payments by renting.
4. Get family onboard.
Your new working situation will likely affect your family, so it is
important for them to know some of the challenges of working on
commission.
If a spouse has a salaried position with benefits that cover you,
your transition may be easier, says Mr. Little. If a spouse also works
on commission or you are the sole provider, you should evaluate whether
working on commission is feasible for your family.
Mr. Humphrey admits it was initially hard to get his wife to accept
the idea of an inconsistent paycheck.
The change may cause stress on the relationship, Mr. Little says he
thinks the "up and down nature of the business" contributed to his
divorce.
"Anyone who plays an important role in your life needs to understand
it may have a financial and emotional impact," says Ms. Stone.
5. Know the rules.
As with any job change, it is wise to research companies you are
considering working for. Ms. Stone suggests speaking with current and
former employees to gauge whether the company treats salespeople fairly.
"Ask questions that may be uncomfortable to ask of the interviewer such
as how much they earn and what to expect about sales territory," says
Ms. Stone. She suggests asking a question such as, "Would you recommend
the company to a friend?" and evaluating the response.
It is also important to fully understand the terms of your
arrangement. Review a copy of the commission plan before you accept any
offers, and during the interview process, ask if the commission plan
changes over the course of the year, says Mr. Humphrey.
Understanding your sales territory and researching the market can
give you a realistic perspective of your earning potential. Ms. Stone
says to research how many prospective companies are in your market, how
many have been contacted by predecessors and how many have relationships
with competitors.
-- April 30, 2007
