My experience in business has taught me a very important lesson about working on commission: Don't do it! If you're not in sales and you take it as a replacement for compensation, you're a chump. Commission means that if you didn't have a hand in a sale, you don't deserve a share of the money. Sounds reasonable, right? Well, let's look at an example everyone is familiar with in order to illustrate where the system breaks down: Many retail salespeople work on commission. They get a portion of whatever they sell because they were directly responsible for securing the transaction with a customer. The more t-shirts or hockey sticks they sell, the more money they make. There is a strong incentive to work hard because you are in complete control of how much money you make. Sales is where commission works.
Now offer the janitor a commission based on t-shirt sales. Tell him that for every t-shirt he helps to sell, he gets a percentage. He plays a small role in every single sale, but what is his measurable effect? How much should he get for keeping the bathroom clean? Sounds like a tough calculation; where would you even start? How about the stager-the company responsible for organizing or designing the way products are presented in the store. They certainly influence sales, but how much? Who have they influenced and how? They never directly interact with clients, so how can you offer them a commission? The answer: You can't.
The Online Marketer faces the same dilemma. According to a 2007 study by Yahoo! 1 in 6 in store sales occur because of something that a customer has seen on the website. Maybe that number is higher or lower depending on the product and how good you are; in any case, it's a difficult task to convince a business to give you a cut of their in-store sales when they've hired you to do online marketing! Even if you do somehow win them over, they will forever feel like you're getting the better end of the bargain and maybe harbour some resentment because of it.
Here's the biggest problem: You're working for free. Even if you eventually get paid, at first you get nothing. It's hard to justify to yourself spending countless hours on somebody else's business when your compensation hinges on two dubious intangibles: A promise, and their ability to success in business. Too many times I see business owners hire somebody using a profit sharing model at 10 or 15%, then expect them to do all the work to drive sales. Maybe they're hoping for a miracle, or maybe there is a flaw in their business model. Also consider what happens if a new client arrives and wants to pay you up front, in cash. Realistically, who would you prioritize? If you want to build a positive reputation, you need to be fair to yourself and to your clients.
If someone isn't prepared to pay you what you're worth, you should think carefully about why that might be. What happens when you have finished your job? Their website is done, you've seeded the marketing strategies and designed their graphics and you are no longer doing work for them. Do they still have to give you a cut? For how long? What if your client changes their mind about sharing the booty? Now we're entering a grey area: Can you trust them to be honest with you about their sales? I know it seems a bit paranoid but I've had clients that I liked hide things from me and withhold payment, saying "I did almost all the work!" Yes, they did almost all the work so they deserve 90% of the take-but I was involved, we had a signed contract, and they broke it because they never really expected to make a lot of money. To someone who has no business, 10% sounds like nothing; tell them that they owe you 10% of one million dollars and they recoil at the thought.
If the client you're dealing with isn't willing to take a risk on you and pay what you're asking, why should you take a risk on them and work for free? On the other hand, if someone offers you a share in the company as a reward, and you are not expected to do any work, that's a way better deal. In that case you can also get a lawyer involved to formalize the arrangement and you will be far less vulnerable. But make no mistake, marketing on commission is a fool's game and it would take a lot to convince me to go down that road again.
About this Author
James Walker is a managing partner in WebVilla.ca SEO, a Toronto based online marketing company. He writes articles about the opportunities and challenges present in building an online marketing business.
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