Sales Rep 101 – Chapter 17

Commission With a Draw

When in Sales this is probably the hardest thing to figure out. And the most import piece to understand before you accept a position. Sales can be hard to make money for the first 6 months depending on the industry so some companies will offer a draw on your commission. Before I explain how this works it is important to understand what that means. Let’s say they offer you a draw of $3000 per month. That means that even if you do not sell enough to make $3000 in commissions the company will still pay you that amount. So the first month your commissions are say $4000, that means you will receive your draw of $3000 plus $1000 in commissions. Which adds up to your $4000. There are several different ways companies can pay the commission but that is the most common. Now here is the most important thing to know before you start. Some companies will make you responsible for the draw and some companies will not. That is an important question to ask before you accept the position. Let me explain. Let’s say you start with a company that will require you to pay the draw back when you are no longer with the company and you were there for 6 months. Over that 6 months the draw adds up to $18,000 but your commissions over that time only add up to $14,000. This means that you will owe your company the $4000 difference. Now, let’s say that you have $6000 in commission coming to you over the next 2 months even though you are quitting or get let go. That will go to what you owe so after that commission comes in they will owe you the $2000 difference. Make sense? Some companies will not require you pay back the draw. They just treat it as a minimum salary that they are paying to work for them. And if that is not in writing before you start you would not be responsible for the draw in most states. But that would be important to research in your state. This sounds very scary to someone new in sales but very few companies require you to pay back your draw. And even if they do you usually make enough commission to make up for your draw eventually. There is another piece on the draw here in the library but I wanted something that explained it in general terms.