Most of us have considered leaving our employers at one time or another. Maybe it was a disagreement with their boss, not feeling well compensated for the work done, having annoying co-workers, or any number of other reasons.
But what if you really did it? What if you left your current job to try working on commission? Tempting as this idea might be, there are some things to consider before taking such a bold new direction in your life.
What Is Working on Commission?
Working on commission involves jobs where an employee’s entire income is based on commissions from sales she or he makes. The employee operates as an independent contractor rather than a salaried employee of a business.
According to Chron.com, “The concept behind paying on a commission basis is that sales representatives will work harder to make sales if their income depends on it.” Commission-based jobs also help employers manage payroll costs since the independent contractor’s earnings are directly proportionate to the sales made.
According to Handshake Corporation, providers of a B2B platform, the industry average for sales commissions is 20-30% of gross margins (i.e. net sales minus cost of goods sold). This means that if you sell a company 100 computers at $200 each, your commission will be between $4,000-6,000. Not bad, eh?
But what if it’s the only commission you make in a month? Whereas some jobs include commissions on top of salary, commission-only jobs are just that: the commissions made. Yes, this is risky, since there is no salary to augment earnings during leaner times or when just starting out.
The Appeal: Control of Your Life
If you are thinking about trying to earn your entire living through commission-based sales, it might be due to the lure of personal freedom–the ability to make your own decisions and set your own schedule. Few would disagree that this is an appealing thought.
Imagine working in the comfort and convenience of your home. You can take time to walk the dog in the middle of the day, pick the kids up at school, or go to the dentist when it’s most convenient.
You also might be able to deduct some home office expenses from your U.S. federal income taxes.
One thing to pay attention to here, though is this: while the habits developed in an office setting and the security of a salary from a regular employer might seem trivial when you’re first considering becoming an independent contractor, you might discover later on that you relied on them more than you expected.
If you are comfortable with this, then one or more commission-based jobs might be the right choice for you. Learn more here.
More Cautions: It’s No Walk in the Park
Be careful, though. The risks are real. For one thing, you not only need to have a good command of the world of business to earn money from commission sales, but you also need to have contacts.
For most people–especially those just out of college, or who might be living in an unfamiliar place–developing a network takes time and some special interpersonal skills. For example, you can’t be a wallflower in this type of work; your ability to shake hands and build networks will be your bread and butter.
Getting started definitely takes patience, too, especially as you’re counting the money you earned (or thought you would earn).
Budgeting for Yourself and Others
Even after getting a good start, there will be ebbs and flows to the income you can generate. Career writer Wendy Connick refers to these as cycles of “feast of famine”–for good reason.
As Connick says in an article, “Survival Tips for Living Off Pure Commissions,” “keeping a tight financial ship is important in any job that includes commissions, but it’s ten times as important when commissions are all you bring home.”
Yet, Connick does not disparage commission sales altogether. She says instead that the key to success in this type of job is good planning. Reading her full article is highly recommended for anyone thinking about making a living at this type of work!
Compensating for Company Benefits
One thing that definitely needs planning is how to compensate for the benefits that come with many salaried jobs. First and foremost, getting decent health insurance at an affordable rate can be challenging.
If you are not in the best of health, perhaps you should reconsider going it alone — or at least review available independent insurance plans first. You should check out healthcare.gov for a listing of options in your state.
You might have to pay out of pocket for life and disability insurance as well. And don’t forget the other perks–the ones that are less necessary but also bring happiness. Here I’m thinking of the gym memberships, shopping discounts, paid vacation, holiday parties, and so on.
Of course, if your spouse or domestic partner already has benefits and is willing to include you, you have much less to worry about.
Helpful Reading
The job-posting website, FlexJobs, has stopped posting commission-only sales jobs altogether but does offer a comprehensive list of pros and cons to this type of work.
They point out that, in addition to the scheduling benefits mentioned above, commission-based jobs allow you some latitude in controlling your income, including using these jobs to augment income from retirement or other jobs.
They also remind us that with this mode of employment, you can know exactly how you’re doing sales-wise without waiting for figures from management.
FlexJobs brings up a couple of other cautions to take note of besides the “ebb and flow” factor discussed above: (1) the possibility of being perceived as a high-risk borrower by banks, and (2) the possibility of losing your job altogether for not making your numbers.
The FlexJobs article is worth a look—as is a Forbes article by Jacquelyn Smith, “Is A Commission-Based Sales Job Right For You? It has a great slide show on the qualities and skills needed for commission-only work.
Some Concluding Thoughts
This article has given you a lot of cautions about working on commission–all based on real experience. Still, commission sales might very well be the best approach for you. You just want to be sure.
Perhaps a conversation with someone who already does this type of work would be helpful in addition to what I’ve discussed here. They might remind you that you will be motivated to perform at your very best.
After all, you are the one determining what your future will be–earnings and all. As they say, “you control your own destiny.”
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