by Peter Lampros

Created on: February 12, 2010

Salary, depending on the type of sales, is certainly fitting to a sales environment.  In most sales compensation plans, however, that salary is backed by certain minimum expectations, which if not met can be detrimental to one's position.  In many cases, this is expressed as a draw versus commission, where commissions and bonuses are not paid until the draw has been met, either by dollars of gross profit (commonly referred to as a bogey) or percentage of market share.  The basis of draw on dollars of gross profit is prevalent.

Many industries in professional sales have longer buying cycles or tend to have seasonal peaks and valleys.  It is difficult for a sales person paid on straight commission to support his or her family during the valleys awaiting a peak buying season.  Other factors, including the economy and prospects' fiscal years, can also mean periods of lower sales or no-sales .  During these lull periods, the professional sales person must continue to prospect and maintain accounts within his or her territory or area of responsibility.

Salaries allow the professional sales person to concentrate on what they must do to ensure awareness and involvement in future purchase projects.  The salary allows the salesperson to not be distracted by economic woes during the prospecting and needs assessment stages of the buying cycle.  Salaries, however, which limit the professional sales person to how much commission they can achieve through caps are an oppressive type of compensation package and should be avoided if possible.  After all, the beauty of sales is knowing one can always increase his or her pay by increasing his or her sales.

A good example of a long buying cycle is the sale of jumbo jets.  The salesperson spends most of the time prospecting and building relationships and the deals take a long time to close.  Without a salary these salespeople would not be as effective.  Industrial equipment and medical equipment tend to be industries with long selling cycles.  One must also consider the length of time it takes for the prospective customer to replace the product.

Staight commission works in some types of sales, such as the automotive sales business, because the buying cycle is typically very short and there are ample prospects to sell.  This has been negatively affected, however, by the down economy, causing many dealers to look at different compensation models to retain good sales people.

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