Assuming the sales people are dedicated to the company (full time, not selling complimentary products produced by a different company), then many companies offer reimbursement for business expenses based on a set policy. The eligible expenses may include mileage, car allowance, cell phone, office space, computer, internet connection at home and/or in the office, office supplies and services (receptionist, copy machine, conference room), insurance and other benefits, training, etc. And some companies do not offer any of these.
The right choice depends on the degree to which the company sees the sales person as a long-term commitment and partner vs. a way to get their offering to market quickly and affordably with as little risk as possible. Earlier stage companies tend to offer less reimbursement (guaranteed cost absorption) as they need to control their selling expense very carefully. They may know they can afford to pay 5% of revenue (for example, and percents may vary widely from that number) to get their offering sold – and they need to hold costs to that level. If that’s the case, then a 5% commission makes sense, with no other compensation.
As the company grows and matures, they are likely to want the relationship to their customers to be as much with the company as with the sales person, and so they will want to be more directive about HOW things are sold, what tools are used, etc. As this happens, they will want to invest more in the sales person in exchange for some increased control over a more standard sales process and customer experience. It would be at this point that the variable pay may decrease and the guaranteed expenses may increase – so some expenses may be directly reimbursed, and a modest base pay may be added while the commission rate may actually decrease.
Then at further later stages of maturity, things may continue to change in the compensation plan to reflect the role of the sales person, the market position of the company, the company’s business model and economic realities, etc.
Donya Rose, CSCP, is Managing Principal of The Cygnal Group. She is a recognized expert in sales compensation plan design, regularly speaking at conferences and writing published articles. She serves clients from F500 to growth-stage businesses, and advises WorldatWork on sales compensation hot topics and best practices.