I understand that this economy is challenging for many sales reps. It’s challenging for companies too. Whether or not a draw is put in place, and whether it’s recoverable or non-recoverable will depend on your company’s financial position and its culture.

Compensation and commission issues can vary tremendously from agreement to agreement, employer to employer, and state to state. I don’t know the specifics of your situation beyond what you have provided. I am also not an attorney.

If the disputed or withheld amount is significant, I recommend you contact a labor attorney, particularly one with expertise handling compensation issues in your state. After reviewing your situation, your attorney will be best able to advise you.

I was recently terminated after only 3 months with an employer who established an at-will base+ draw compensation package. The sales goal for the first quarter was overly ambitious, but I agreed to it because I wanted a new opportunity for growth. The employer and the job was not a good fit, and I did not meet my sales goals. My employer terminated me, even though I had 2 proposal meetings scheduled including one the very next week. He held my last paycheck to put against my draw, and has been harassing me about the remaining draw. I reviewed our agreement, which stated that draws not met in the first quarter would be taken from my base compensation, but there is not language about re-payment after termination. I strongly believe that I do not owe this amount as it was an unfair work environment (in the CEO expected me to also perform marketing functions for the company in addition to attending time-consuming meetings with his sales coach). I also learned after leaving that this CEO has a reputation for being difficult to work with, and even abusive. Does he have any legal recourse for making me pay the remaining draw?

From the employee’s perspective, you will want look at whether the draw is recoverable or not. Plus, look at what the draw is recoverable against. If the draw is non-recoverable (i.e., you get it no matter what and you don’t have to pay it back at the end of the year or if you leave the company), then ask for as much as your employer will give you. There’s no risk beyond being viewed as greedy, needy or otherwise a high-maintenance sales person. This will allow you to focus on developing sales and not worry about money.

If the draw is recoverable, then you will want to look at the mechanisms for recovery. Is it recoverable against future commissions (most common)? Base salary? Expenses? Other monies owed to you? On demand (unsecured loan)? In this case, you need to determine how much debt you are comfortable carrying. Also, what is the likelihood of earning commissions that exceed the draw and when will commissions surpass the draw amount?

Given what you’ve outlined below, I would target $86,000 for the draw (they may or may not agree to this amount). I would also negotiate for the draw to be non-recoverable for some period of time (6 mos? 12 mos?) based on a realistic period you need to transition your client base. Thereafter, you and your employer may agree upon a draw amount, recoverable against commissions, that smoothes out cash flow until you are established.

I am a Financial Advisor and have been in the business for 3 years and have been doing very well with the firm that I am employed with. I currently work on 100% commissions. I receive a 36%-40% payout of gross commissions. I have been contacted by a very prominent Local Investment firm that would like me to work for them and would like to structure some type of draw against commissions and I was looking for some guidance of how much to negotiate as a draw. My Total comp for 2010 was $86,000 not including profit sharing or health insurance benefits. Projected 2011 $100,000. Should I target $86,000 as my draw since that is what I made last year and as I transition some of my own clients over to the new firm that I could eventually remove the draw against commissions? The firm is aware that I really wouldn’t be willing to switch Firms unless I could realistically double my current income. Thanks for your help. Adam

I like the table approach you have used to try and illustrate the situations by which you decide to use inside sales versus outside sales.

I wanted to add my observations to yours. As the President of InsideSales.com, I have the opportunity to observe hundreds of companies as they are in the process of starting or growing an inside sales team. More and more we are finding companies with bigger ticket items and higher product complexity being sold effectively by inside sales or remote sales teams.

In fact, taking the definition of inside sales as remote sales, we are finding that a majority of the time spent by an outside sales person is spent actually doing inside sales, or selling remotely. Product margins seems to have very little or nothing to do with the discussion. Bigger ticket items still benefit with a face-to-face meeting, but there are far fewer of them in the sales cycle, with much more meetings facilitated remotely.

Here is how I would modify your table:

Inside Sales Outside Sales
Product or Service Cost Low – Medium High
Perception of Product Value Low – Medium High
Product Complexity Low – High High
Transaction Size Small/Medium Large
Product Margin Small/Large Large
Target Geography Wide Narrow