If a salesperson has been getting a commission of approximately $50,000, then he/she won’t make much more than that next year. The good thing for entrepreneurs is that the salesperson is unlikely to sell less the next year.
Think about the thermostat that controls the temperature in your home.
If you set the thermostat for 70℉/21℃ in the winter, then anytime the temperature goes a degree below 70 degrees, the furnace will turn on and warm up your home. It doesn’t heat to 70 degrees and then stop. It heats your home to a degree or two above 70 and then turns off.
Salespeople have a thermostat.
Say you need the salesperson to earn $100,000 in commissions. Then you need to hire someone who regularly sells enough goods or services to earn $100,000.
If you hire a salesperson who has earned $50,000 at his last sales job, he’ll earn $50k at your company too.
What if the applicant earned $200,000 in commission at his previous sales job? He will earn that at your company, too.
Sounds great, right?
Bring in a salesperson who can generate more sales than you’ve ever handled before?
You must provide enough quality leads for him to earn a high enough commission. If he doesn’t get to earn the level of income his thermostat is set for, he will quit to work for someone else.
If you hire someone with a thermostat set too low and you need them to be hotter, then you will be very disappointed. With some pushing and coaching, a $50k earner might make $60k in a year, and then promptly drop back to $50k the next year. Or if you’re lucky, stay a $60k earner (essentially setting the thermostat to 71℉).
After a few years of coaching that salesperson to sell better, he may end up a $100k earner.
It is rare for salespeople to start earning high commissions after consistently earning low commissions.
When the salesperson doesn’t perform up to the entrepreneur’s expectations, the salesperson either quits or gets fired.
Hire At The Right Temp
When you’re interviewing sales candidates, remember this…
Salespeople tend to be better at selling themselves than at selling products. So you have to look at their thermostat — their track record of earnings. Their commission track record will tell you what their thermostat is set at.
Hire the candidate that has the right temperature for your business.
If their thermostat is within 10% of the minimum you need them to perform to, then they might work out. If their thermostat is set outside of 10%, above or below, then they might not be a fit for you right now.
PS. Entrepreneurs have a thermostat, too. If you’ve earned less than you wanted from your business for a couple years, it is time to reset your thermostat.