- Hey everyone, it's Neil Patel here
for another Q&A Thursday video.
I'm here with Adam LoDolce from Viewership.
- Hello everybody!
- And this week's question is--
- This one's from Jason Valasek and I think
we've seen a couple other questions from him
in the past so thank you Jason.
If you wanna be featured like this,
leave a comment right there below
with your question and we'll answer it.
So, he's dying to hear our thoughts on what
compensation structure looks like for
commission salespeople vs. task-oriented people
and how to blend in 1099 contractors.
- Sure, so with commission-based salespeople,
typically the best salespeople are the ones who get a base.
Yes, you can do commission only.
If you're in the United States, you can find
a ton of amazing commission only
salespeople based out of Utah.
As they say, if you can sell religion you can sell anything.
That's how the saying goes in sales.
And that's why you're seeing a lot of companies
go to Utah to run their sales team.
From the Adobes of the world to
the Salesforces of the world.
I didn't come up with that saying,
that's just what I learned from some of these guys.
Also, they told me Utah's one of the best places
to go find amazing salespeople.
- Because they're Mormons right?
- They're Mormon.
- They'll go door-to-door. (simultaneously)
- And they do it for free. - Yeah.
- Right? Because they believe in the cause.
So if you can find some of those hungry people
to sell your products or services,
the chances are because they have amazing
work ethic, they'll do well too.
But what I've, in general, is if you pay your
salespeople a base they're much better off
than if you only pay them commission only.
So look for salespeople that are experienced.
They're hungry, not too experienced
and when you look at their base plus commission.
In general, when you look at your whole sales department
because there's other costs. There's a VP of sales,
there may be a Sales Director.
You may have some of your fulfillment people
or other people within the organization
having to help the salespeople close some deals.
In general, whatever you're closing in revenue,
sales should not cost you more than 10%.
If it starts costing you more than that,
it's just gonna eat away at a lot of your margins.
Which means you won't be able to provide
amazing results or invest as much in products or services.
- I have a question. Just 10% of lifetime value
of the customer or 10% of initial deal?
- We look at it as 10% of the first year's deal.
- I see.
- Venture funded companies are
a bit more flexible. - Yeah, right.
- I've seen some of then go up to like 20 to 30%.
I'm talking for all of you guys who are
bootstrapping, trying to make it out yourself.
Because you need to have a self-sustaining
business model that works well.
For example, if you look at DOMO right now,
they went public, their stock got hammered.
A company that once had a billion plus
valuation, if I'm not mistaken.
At least based on the day from when I'm recording
the video, they're worth in the
hundreds of millions of dollars.
Why is their valuation down? Their expenses are too high.
You're in business, whether you like it or not,
to also make a profit. I'm not saying you
shouldn't pay people well because you have to
keep in mind that without the people
on your team, you will not have your business.
The people on your team will determine
how good or big of a company you build.
Elon Musk doesn't build Tesla,
it's all the people around him.
Yes he's smart, but it's the team that has
helped him get to where he is, more than just himself.
And I learned that from Richard Branson,
we were speaking at a conference together and he's like,
"It's all about your team. You're not gonna
"build anything big without an amazing team."
So, pay 'em well. That's why I recommend you
don't do commission only, you pay them a base.
They're much higher quality sales reps
and in general your total compensation for your
whole sales department should be around 10%.
If it's lower than that, increase it. Treat 'em right.
If it's higher than that, you need to figure things out.
Because you need to invest in product, support,
engineering, software, what other divisions you have,
and still have a healthy profit margin so you can take
that money, provide amazing perks to your team members.
And of course, you can also use that cash
to expand more, dump it into marketing and grow.
So, that's how I look at sales.
As it comes to other tasks, I don't really look at it as
"Hey, here's how I pay my contractors.
"Here's how much it should be".
I look at it as like, alright let me go to sites
like Upwork. I know a lot of people say Upwork sucks.
It's because most people hire Upwork
just based on they don't have enough completed jobs,
they don't look at their success ratio,
they're not looking at all the reviews,
they're not talking to them and pre-screening them
and being picky enough. It's not about
just getting the cheapest people in Upwork,
it's about getting the people who are qualified
and you're getting a good bang for your buck
so you need to look at quality and price
and have some sort of balance there.
And just make sure that, whatever
you're paying, it's worth it for you.
And then, after a while it may get so expensive,
you're like wait if I just hired someone
full-time it would be cheaper and that's when
you need to start moving people into
being in-house within your office versus
just being virtual and contractors.
- Definitely. And just one note I've seen
with hiring contractors and hiring employees,
is it's less necessarily about the money.
Because the psychology of money is more so,
yes, people are not happy if they're
not making enough money. But once they make
a certain amount of money, more money doesn't
necessarily make them more motivated, right?
So, you can actually sometimes overpay people to an extent
where it doesn't even motivate them to do more.
People more so want to feel like they're
a part of something, a part of the organization.
Neil has talked a lot about passion the past
couple of days and I've got a lot out of that, right?
- Yeah.
- He said hire people who are passionate,
who are excited about what you're doing
and that's what really matters.
So, I just wanted to kind of like chime in
on that point because I thought that was a big
idea that I took from this week.
- And I can't take credit for that.
That came from Steve Jobs.
He always said when you're hiring people,
it's not about hiring people who have the best resume
It's about hiring people who are hustlers,
people who just hustle hard and get stuff done
and are passionate because if someone's passionate,
they're willing to put in the time, the energy, the hours,
whatever it takes to succeed and accomplish their goals.
And they'll be there for the long haul
versus someone who keeps hopping around every
six months or every year looking for a new job.
So that's it for this week's Q&A Thursday video.
Thank you guys for watching.
If you have a question, leave a comment below.
We may answer it next week, either way,
I'll respond to it and answer it.
Again, thank you. Make sure you subscribe, like,
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Appreciate you guys watching.