Paying Commissions in a Start-up. Should You?

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Should you pay commissions in a start-up?  The simplest answer is yes.  There are, of course, many things to keep in mind.  Here are a few:

  1. Decide early on if you will commission sales to existing customers or just new customers.  There is no right or wrong here.  If a direct relationship is key to your ongoing customer retention, you may want to commission your sales team to help keep customers.
  2. Make sure those on commission are rewarded when the cash shows up, not when the deal is signed.  You need the salesperson invested in the completion of the deal, not just the start.
  3. Set quotas on a monthly or more frequent basis.  Do not fall into the trap of the quarterly hockey stick shaped revenue curve.
  4. Never cap commissions.  If you get a star at selling, keep them motivated.
  5. Learn to manage sales people from a pro.  If you can’t hire a sales manager, get one on your advisory board.  This is one of those “you don’t know what you don’t know” areas.

Commissions work and motivate people to perform.  Make sure the result of paying a commission is in line with your tactical goals and not detrimental to your business.

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