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Still Paying Salespeople Draws? Why?

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Learn why paying draws to salespeople is a flawed investment strategy in this episode of the Sales Management Minute.

Many executives pay draws to bridge sales earnings when salespeople first join the company. This strategy is intended to help them attract top talent by keeping the salesperson’s income consistent when starting a new job. However, is this strategy truly paying dividends for the company? Or, is this strategy flawed?

To answer those questions, let’s look at the two types of draws.

There’s the recoverable draw which is a loan to the salesperson. Every day the salesperson comes to work, he accrues debt. Nothing like working hard to owe more money today than yesterday.

The other type is the non-recoverable draw. This is free money given to the salesperson for some duration of time. If you have a pulse, you get the money.

While the intent behind paying draws is understood, the ultimate goal of getting a fast, high return on the new-hire investment is not necessarily achieved. Why not invest those dollars where they can impact both the top and bottom line? Invest them in sales onboarding.

Oftentimes, sales onboarding only includes curriculum. That means training is provided to the salespeople without measuring mastery. What if you had an assessment part of sales onboarding during which the new salesperson’s information and skills mastery is evaluated.  Imagine concluding sales onboarding with a written exam and a sales call simulation. Based on performance, salespeople are eligible for a bonus.

Investing dollars in sales onboarding does three things for the company:
1. It gets salespeople focused where you want them to be … on getting up to speed, fast!
2. The onboarding exam and simulation show who is ready to sell and who is not – so you can see who needs additional coaching.
3. There are no dollars are paid (above the salary) unless onboarding expectations are met which means the salespeople have skin in the game.

This strategy is a winning proposition for both the company and its new salespeople. See you next time on the Sales Management Minute!

Lee B. Salz is a leading sales management strategist specializing in helping companies build scalable, high-performance sales organizations through hiring the right salespeople, effectively onboarding them, and aligning their sales activities with business objectives through process, metrics and compensation. He is the Founder and CEO of Sales Architects, Business Expert Webinars and The Revenue Accelerator. Lee has authored several books including award-winning,  best-seller “Hire Right, Higher Profits.” He is a results-driven sales management consultant and a passionate, dynamic speaker . Lee can be reached at lsalz@SalesArchitects.net or 763.416.4321.