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Ask HN: Is this sales person too good to be true?
Hello HN,
I have a startup and was contacted by someone on LinkedIn. She's a lawyer and a sales person who has contacts she believes she can sell our service to.
She wants to work purely off commission. She would make introductions and also help "close the deal" (she's a lawyer as well). Her target is to close contracts of $100k+.
She said she has contacts with a specific market that our service is a good fit for. A check on LinkedIn shows that she does have connections to said market.
She has spent a few hours so far on phone/skype calls to answer my questions and get enough information from me to prepare her pitch for the companies she's going to approach. She signed a mutual NDA but we haven't given any trade secrets away.
But it sounds a bit too good to be true. No down side for us and we only incur cost if she brings and closes a deal. We pay her commission only after we get paid.
Anything I should look out for?
- mcintyre1994 13y agoGet a lawyer (not her, obviously) to write everything up and make sure it's above board, if there's no legal issue with it it can't hurt to try. Maybe make that $100k a target for her too?
- throwawayques 13y agoThanks. I'm sending the contract off to our lawyers to review. The $100k target was set by her - meaning less than that and it's not profitable for her.
- mcintyre1994 13y agoAh, that's good then. I thought it was just something she'd mentioned - "I reckon I can get 100k" type thing which could easily be exaggeration. If you're pretty sure she won't be profitable unless she gets that, a lawyer OKs it all, I think you're in a pretty good situation.
- dkisit 13y agoIt could go either way, but I'd be wary of a lawyer who's seeking only commission. Is he/she seeking equity too?
- nashequilibrium 13y agoI don't see how there is a catch here. She probably realizes that you have something that she can sell to her contacts. She makes a nice commission and you get a customer, both sides benefit. She probably also realizes that she cannot ask you for any upfront money as that will smell like a scam. This is more a sign that she is confident that she will make money thereby making you money as well.
- throwawayques 13y agoThanks. If our lawyers give an okay on the contract I hope her confidence turns into sales. I'm typically skeptical but I have to be an opportunist too. Exhausting! :)
- orangethirty 13y agoYou have to write up a contract that states she works for commission only. After that, its all her effort.
- throwawayques 13y agoThanks. She drafted up a contract (she's also a lawyer) which we're sending off to our legal counsel. She spent an hour with me going over every word of the contract and I only had concerns about one point which she was happy to amend.
- notahacker 13y agoIf she's as good and well connected as she says she is, commission only works better for her: she has complete control over when and how she promotes your service (presumably she racks up billable hours in other ways as well) and can legitimately ask for a larger share of the deals as commission than you'd pay an employee.
- throwawayques 13y agoThanks. I hope so. She was very straightforward that all of her "costs/fees" are bundled up in the commission. She's a lawyer so she'll do legal work related to the sales (NDAs/partnership agreements/etc) and that's how she justifies the X% commission. I'm very happy to pay commission on sales.
- bmelton 13y agoA very long time ago, I cofounded an IT services company to install server equipment, networking services, that sort of thing. My partner suggested we create a commission-only sales position and offer it online in the help wanted section. We'd simply up our rates by 20%, then start offering a 20% commission on the initial sale, and 10% residual commissions of future work to anybody that could close a sale. I thought it was a dumb idea at the time, because who in their right mind would work for free? Turns out, a LOT of people. We got far more interest than we'd ever had, and ended up having to scale the business really quickly to keep up with the sales guy. Later, we expanded the idea to just offering a flat 10% finders fee for non-employees that just wanted to bring us work. After word of that spread, it was nearly impossible to keep up with all the work coming in. In short, that's a really long way around to say that there's probably nothing fishy with the offer. Of course, if you're selling a product that retails for $20, it's probably not going to work out, but if your average sale is over $10,000 or so, it makes sense. For people who sell things in batches of millions (Oracle, EMC, Cisco, etc.), their sales people get salaries, sure, but it's a hugely commission driven business (which is why the sales people always seem to end up selling features that don't exist that engineers have to scramble to implement).
- throwawayques 13y agoThanks for the comment. Very helpful. Our product is targeted at end consumers at a yearly subscription. This person wants to sell our service to companies on a monthly basis (contracted for a full year). The sale would be in batch for revenue of $100k+ per customer (who would have to be able to sell it to enough consumers on the other end). I think this falls in line with what you're saying would work. The idea of opening it up is very interesting. I knew from the start that the success would be tied to distribution. I didn't think of "sales" as one of the distribution channels but rather thought in terms of business development. At the end of the day it may be two terms for the same thing but I'm happy to have stumbled upon this.
- bmelton 13y agoMost of the folks doing business around here are kind of foreign to the concept of high-touch sales. We build our products and sell them for $9.99, $29, or $50 a pop. A 'high-touch' sales process is completely different. If you're selling something at that price point, you need sales people to actively reach out and find customers. On top of that, high-touch sales processes generally involve very long sales cycles. There might be months between the first customer meeting and the actual closing of the sale. For sales people, this means leveraging who they already know that might be interested, because there's often such a long time between targeting a new customer and knowing whether or not they're serious, so for every sale you make, you might have had 10 other sales fail, for any number of reasons. If you have somebody volunteering, that likely means that they know of qualified buyers that they could target to immediately. She might be able to sell to 10 buyers (and put you in a pretty good position) and then run out of contacts. Going from pre-existing, qualified contacts to going to actually having to cold-call, market, and perform lead-gen is a terribly involved process, which she may never do. It would not be insane of you to have a very high churn rate on sales people, swapping them out every time they exhaust their rolodex.
- badclient 13y agoMake sure what she ends up selling is your product, not fiction that your product can't do.
- throwawayques 13y agoThanks. Good point. We've talked pretty extensively about what our product can do. She's also asked about what it can't do so I hope that's a good sign.