
Ask HN: Is this sales person too good to be true? - throwawayques
Hello HN,<p>I have a startup and was contacted by someone on LinkedIn. She's a lawyer and a sales person who has contacts she believes she can sell our service to.<p>She wants to work purely off commission. She would make introductions and also help "close the deal" (she's a lawyer as well). Her target is to close contracts of $100k+.<p>She said she has contacts with a specific market that our service is a good fit for. A check on LinkedIn shows that she does have connections to said market.<p>She has spent a few hours so far on phone/skype calls to answer my questions and get enough information from me to prepare her pitch for the companies she's going to approach. She signed a mutual NDA but we haven't given any trade secrets away.<p>But it sounds a bit too good to be true. No down side for us and we only incur cost if she brings and closes a deal. We pay her commission only after we get paid.<p>Anything I should look out for?
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bmelton
A very long time ago, I cofounded an IT services company to install server
equipment, networking services, that sort of thing.

My partner suggested we create a commission-only sales position and offer it
online in the help wanted section. We'd simply up our rates by 20%, then start
offering a 20% commission on the initial sale, and 10% residual commissions of
future work to anybody that could close a sale.

I thought it was a dumb idea at the time, because who in their right mind
would work for free? Turns out, a LOT of people. We got far more interest than
we'd ever had, and ended up having to scale the business really quickly to
keep up with the sales guy. Later, we expanded the idea to just offering a
flat 10% finders fee for non-employees that just wanted to bring us work.
After word of that spread, it was nearly impossible to keep up with all the
work coming in.

In short, that's a really long way around to say that there's probably nothing
fishy with the offer. Of course, if you're selling a product that retails for
$20, it's probably not going to work out, but if your average sale is over
$10,000 or so, it makes sense. For people who sell things in batches of
millions (Oracle, EMC, Cisco, etc.), their sales people get salaries, sure,
but it's a hugely commission driven business (which is why the sales people
always seem to end up selling features that don't exist that engineers have to
scramble to implement).

~~~
throwawayques
Thanks for the comment. Very helpful.

Our product is targeted at end consumers at a yearly subscription. This person
wants to sell our service to companies on a monthly basis (contracted for a
full year). The sale would be in batch for revenue of $100k+ per customer (who
would have to be able to sell it to enough consumers on the other end).

I think this falls in line with what you're saying would work.

The idea of opening it up is very interesting. I knew from the start that the
success would be tied to distribution. I didn't think of "sales" as one of the
distribution channels but rather thought in terms of business development.

At the end of the day it may be two terms for the same thing but I'm happy to
have stumbled upon this.

~~~
bmelton
Most of the folks doing business around here are kind of foreign to the
concept of high-touch sales. We build our products and sell them for $9.99,
$29, or $50 a pop. A 'high-touch' sales process is completely different.

If you're selling something at that price point, you need sales people to
actively reach out and find customers. On top of that, high-touch sales
processes generally involve very long sales cycles. There might be months
between the first customer meeting and the actual closing of the sale.

For sales people, this means leveraging who they already know that might be
interested, because there's often such a long time between targeting a new
customer and knowing whether or not they're serious, so for every sale you
make, you might have had 10 other sales fail, for any number of reasons.

If you have somebody volunteering, that likely means that they know of
qualified buyers that they could target to immediately. She might be able to
sell to 10 buyers (and put you in a pretty good position) and then run out of
contacts. Going from pre-existing, qualified contacts to going to actually
having to cold-call, market, and perform lead-gen is a terribly involved
process, which she may never do.

It would not be insane of you to have a very high churn rate on sales people,
swapping them out every time they exhaust their rolodex.

~~~
throwawayques
True and probably why I was more skeptical than I ought to be.

She did mention cold calling so that might be a fallback depending on how well
her rolodex pans out.

Thanks again.

~~~
bmelton
Any time. The main concerns you have are what the percentages are, and how
much margin you can actually afford, as well as what kind of book-keeping is
involved to make sure that commissions are paid out if they're paid on future
work. Make sure that giving away x% of something is still profitable
(obviously), but more importantly, make sure that you're still making enough
to acquire new customers, grow the business, etc. You can always raise your
prices for new customers, but if you raise your prices on old customers, that
means you're paying a higher commission if the commission included future
work. Things like that generally take a little bit of tweaking, and of course,
you have to pay electric, server costs, hosting, etc. The sales rep doesn't.

Years from now, it might be harder to remember which sales rep sold company_x,
and what the terms of the arrangement were. We found that the bookkeeping
process was quite a pain in the ass. Expect to have to write something custom
for that.

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nashequilibrium
I don't see how there is a catch here. She probably realizes that you have
something that she can sell to her contacts. She makes a nice commission and
you get a customer, both sides benefit. She probably also realizes that she
cannot ask you for any upfront money as that will smell like a scam. This is
more a sign that she is confident that she will make money thereby making you
money as well.

~~~
throwawayques
Thanks. If our lawyers give an okay on the contract I hope her confidence
turns into sales.

I'm typically skeptical but I have to be an opportunist too. Exhausting! :)

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notahacker
If she's as good and well connected as she says she is, commission only works
better for her: she has complete control over when and how she promotes your
service (presumably she racks up billable hours in other ways as well) and can
legitimately ask for a larger share of the deals as commission than you'd pay
an employee.

~~~
throwawayques
Thanks. I hope so. She was very straightforward that all of her "costs/fees"
are bundled up in the commission. She's a lawyer so she'll do legal work
related to the sales (NDAs/partnership agreements/etc) and that's how she
justifies the X% commission.

I'm very happy to pay commission on sales.

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mcintyre1994
Get a lawyer (not her, obviously) to write everything up and make sure it's
above board, if there's no legal issue with it it can't hurt to try. Maybe
make that $100k a target for her too?

~~~
throwawayques
Thanks. I'm sending the contract off to our lawyers to review. The $100k
target was set by her - meaning less than that and it's not profitable for
her.

~~~
mcintyre1994
Ah, that's good then. I thought it was just something she'd mentioned - "I
reckon I can get 100k" type thing which could easily be exaggeration. If
you're pretty sure she won't be profitable unless she gets that, a lawyer OKs
it all, I think you're in a pretty good situation.

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orangethirty
You have to write up a contract that states she works for commission only.
After that, its all her effort.

~~~
throwawayques
Thanks. She drafted up a contract (she's also a lawyer) which we're sending
off to our legal counsel. She spent an hour with me going over every word of
the contract and I only had concerns about one point which she was happy to
amend.

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badclient
Make sure what she ends up selling is _your_ product, not fiction that your
product can't do.

~~~
throwawayques
Thanks. Good point. We've talked pretty extensively about what our product can
do. She's also asked about what it can't do so I hope that's a good sign.

