Hi all! Long time lurker, first time posting. Would love this groups opinion about our sales team structure connundrum
Tl;Dr - is my gut correct that commission only sales rep is a bad way to go or should I give it a try?
Background: I am supporting an early stage startup in Business Operations laying the groundwork for success from a tools, metrics, and operations perspective.
I'm working with two great founders and a team of 7 currently all contract team members. We're currently in the fundraising phase, have an MVP, website/social media, and are waiting to hear back from one VC firm on finding (expecting between $300k-$500k for our first fundraising round).
Our product: we have a business solution for bars, events, and nightclubs to be able to track customer analytics, sell passes, and better manage their lines. We have really great feedback from the market so far, have several hundred users already, and are looking to rapidly bring on more businesses.
Problem: I'm working with our two founders to build our hiring strategy for bringing on 3 more sales reps. Our current team is paid on commission and have stock options but once we hit funding my understanding was the plan was going to be to convert team members to PT paid employees.
However, as one of our founders has been working on a commission structure they're pretty set that the next step is to move to a full commission only structure where reps are paid based on businesses onboarded + get a cut of the profits businesses make on passes that they sell to events. Meaning no options for sales people and if a rep onboards a company a year ago, they'd still be getting a cut of the profits for passes sold by the business ad infinitum.
What concerns me about this structure is: A) it doesn't feel like a true SaaS-based sales structure, B) it's giving me MLM vibes of promises of big windfalls but a lot of selling before our team makes a profit, which means that C) it only incentives getting businesses on board but not any of the process/infrastructure building that we still need to do, D) we'd have a hard time attracting high quality talent to do this job, E) we're risking high turnover right at the get go, and F) we'd be getting less profits as a company over time owing it to reps who is profiting on a business they converted 6-18 months ago
On the flip side: A) it doesn't cost nearly as much per contractor (to begin with) to bring them on board, B) we can get started before funding comes through since the pay is contingent on actual sales being made, C) it allows us to hire across the US with less challenges on employment law and registering in every state we want to operate, and D) it's a high reward outcome for someone who this is attractive to
So I wanted to get this groups thoughts. Have you heard of any SaaS company that has had success with commission only sales reps? Any examples of this working that isn't an MLM or scammy company?
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