Commission for appointment setters is a common question when setting up the sales processes for new organizations.
"What is the best commission model when hiring a sales person to sell digital marketing services to small businesses?" was asked on an expert platform I'm a member of.
The asker went on to explain that the owners of the business will handle the consultation and closing. So it wasn't a "sales" role...it was phone prospecting...appointment setting.
I've set up agencies for commission sales teams in the management consulting field.
Issues with Commission for Appointment Setters
[I wrote the following in 2015] Finding people to work entirely on commission was possible pre-2008, but nearly impossible after 2011. The level of skepticism, coupled with people holding PhDs and psychiatry degrees realizing they shouldn't be trying to duck into being telemarketers until their practices pick back up, lead to a huge drop-off in the number of candidates.
I also hired firms specializing in finding commission sales candidates, and they were unable to provide me more than a couple of resumes of people who did not stick. To be fair, this was in 2012-13 and their situation may have changed by now.
However--with the minimal buy-in, loyalty and typically abysmal investment in training the hiring company provides, it is in my opinion not worth traveling down that path.
The candidate doesn't really have a reason to stick around. Any time a regular wage job is put in front of them, they'll jump. And most never wanted to be making calls in the first place.
I know several business owners who run "boiler room" type operations and they are constantly juggling and struggling with staffing. Callers go to lunch and don't return. They don't show up. And this is when paying the callers a wage! From my perspective, it wasn't worth the hassle.
Perhaps you'll find someone who has the commitment, the drive, the energy and the talent to be a good commission appointment setter. As far as I'm concerned, that would be like winning the lottery.
Two more thoughts.
First, to attract someone into a role like this, you really have to be paying an hourly rate. I'd skip commission entirely. Your retention will be much better, depending on how well you screen candidates.
Second, if you're going the commission route, the rate has to be big enough to be worthwhile. Yes, maybe 5% IS an appropriate *percentage* of the sale to give an appointment setter--but is it a significant-enough amount of *money* to be worth the person's time?
You'll have to figure this out with your own numbers and see if a person can really make a livable wage out of your numbers.
After all, they don't get paid unless the owners do their job, too. If they don't sell, the setter doesn't make anything. Personally, I would not want to hand my financial fortunes over to someone else like that.
Is Your "Game" Rigged for the Setter to Fail?
Can the setter really make the number of dials necessary to succeed?
Let's say your service is priced at $5000. 5% of that is $250.
I don't know what the livable wage is in your area--in NY and LA it's going to be much higher than, say, Portland, OR or where I am in Wilmington, NC--but let's say the setter needs a good $2500 a month to scrape by.
That's $2500/250 = 10 sales.
10 SALES.
Not 10 appointments set.
We still have to back into that number.
Now if you're the owner, or the person doing the selling, how good are you?
Most people overestimate their competency level. They believe they're going to close almost all of the prospects who come their way. Not so!
Not even half.
Let's say, generously, 1 in 3.
Maybe your setter does a bang-up qualification job (Secret: that's what you're really paying them for) and you really can close 1 in 2. But let's go 1 in 3 and I still think that's generous.
So now your setter has to bring you 3 X 10 = 30 leads every month.
An Overlooked Factor in Commission for Appointment Setters
How long's your sales cycle?
Hadn't thought of that, had you!
Will Your Setter Survive Month One?
That means you're going to have to back out the final of these 30 leads to the date that leaves enough time to finish that cycle before the month expires and our poor setter runs out of time to make their revenue target.
See what I'm saying?
What this translates to, in English, is your setter's probably going to have a pretty bad first month.
Why?
Because they're filling the funnel.
Unless they go nuts, like aiming for 60 or 90 or 100 leads to cram into that funnel, the odds of enough getting through the sales cycle and closed and paid so they can be paid is low.
So let me ask you this:
If you work hard for a month and at the end things look terrible and you didn't make the money you expected--despite your effort being "on target"--
how do you feel?
Like you want to quit, right?
Unless you want a rotating door of setters, I strongly suggest you set up the equation to it supports your hire and gives them the time and financial reward they need to succeed. Which means they HAVE to survive through to that second month...keep putting in the effort, and seeing the good results appear.
Number of Dials Needed to Earn Commission for Appointment Setters
Back to the math...
To get those 30 leads (and remember, that is when the sales funnel is FULL, and your setter is continuing to load more leads into it to keep it full, and you have many prospects at various stages of the pipeline--not just at the beginning), how many people does your setter have to call?
We know, on average, that only 1 in 4 prospects dialed will be ready and available to talk today.
So 30 X 4 = 120 is your setter's ultra-basic, bare minimum number of dials. And really, I bet it will end up being double or triple that.
Does your setup, and your setter's situation, support them being able to make those dials?
And remember, this is with a decently mid-ticket offer of $5000. If your price is actually lower, the number of leads and dials are going to be much higher.
These calculations will of course vary depending on your situation. My intention here is to give you a sense of what's involved and where the perils are.
Just remember: Dials >>> Leads >>> Sales
2021 Update:
The original post was written in 2015. The current update for commission for appointment setters as of 2021 is this... the same rules apply. An organization I did some work for recently hired a returning-to-work mother to do what I would call luke warm calling—the calls were not cold, but they were not quite warm, either. Lead reactivation was the focus. She was highly skilled and "overqualified" for the role. Also, she had little phone experience.
The Outcome of This 2021 Appointment Setting Hiring Decision
I was not much involved in this decision and provided some scripting assistance. The fact is that she did not last one day in the role. No better example of the principle, "Perception Is Reality" than this has come up in the past while: to her, these were cold calls. She was not prepared for what she perceived as the loneliness of the role. The takeaway for you in 2021 is: filter for people who understand what they're getting into here, and like it. Do not take people who come along, even if they look good from a skills point of view. "They'll grow into the role I imagine at a step above this one" is not something to bank on. And the simple math we discussed above continues to apply.
>> Jason Kanigan is a worldwide authority on cold calling. Want his help? Visit the corporate services site here. <<
