How To Survive Your First Year In A Commissions Based Job

How to survive your first year in a commissions based job

8 minutes read

For many self-employed or business owners, the first year is a frightening prospect. For many, it’s the first time they’re faced with an unpredictable income. It’s not an exaggeration to call this first year the biggest hurdle: it’s the biggest initial test of whether you have the right mindset to succeed. There are, however, some steps you can take to improve your odds of success:

Key elements to surviving your first year

Unlike a regular employee, you’re often left to “figure it out” on your own. This is actually one of the perks of being self-employed, as no one is around to control your time or business decisions; however, it can be frightening to have this freedom at first.

It’s important that you maintain a systemic or disciplined approach, even with no one looking over your shoulder. This should consist of the following:

● Understand and practice a zero-based budget

● If possible, ensure you’re not under-capitalised

● Be humble and seek mentorship

● Undertake new initiatives gradually

● Collect data, and document every process

● Understand the impact on financing

● Start building alternative income streams

1. Understand and practice a zero-based budget

Zero based” means that every dollar is accounted for: when you are done budgeting for your expenses, savings, leisure spending, etc. the remaining funds for the month should be zero. Simply put, you always know where every dollar is spent – be it going into your emergency savings, or going into transport fares.

(As a rule of thumb, at least 20 per cent of your monthly income should be budgeted for a savings fund. While most people aim to build a fund of six months’ expenses, the self-employed may want to aim for up to 12 months, to account for more volatile income).

An important aspect of zero-based budgeting is that it’s always based on money you have now, not money you expect to make next month. For example: if you have $2,000 in January, but expect to earn $7,000 in February, then February’’s budget must be based on $2,000.

When you work on commissions, you cannot predict how much you will earn next month. All you know for sure is how much you have this month. As such, your budget must always be based on what you actually have.

This prevents the need to use credit cards, personal loans, and so forth; 100 per cent of next month’s (foreseeable) expenses are already set aside.

2. If possible, ensure you’re not under-capitalised

It’s not uncommon to see little or no profit in the first year of any venture – be it a business or a sales job. Of course, you should be optimistic and plan to do better than that – but sustainability is a big contributor to positive thinking.

(If you’re down to your last dollar it’s very hard to stay inspired, and your anxiety will affect your business).

For this reason, try to be sufficiently capitalised before you take up a commissions-based job. This could mean, for instance, saving up six to 12 months of expenses, before you jump into a sales job.

It’s not always possible, but it’s a huge help if you can manage it.

3. Be humble and seek mentorship

If you see someone else doing well in your line of work, put aside prejudices about their success (e.g., complaining that they only succeed because they have a privileged background, are lucky, and so forth).

Chances are, if someone has the success you want, they know something that you don’t. Take the humble route, and ask them for help. This is vital in your first year, when you have yet to develop proven models of how to market yourself, prospect for clients, and so forth.

Finding a mentor is especially important, at the very start. Note that a mentor is not just anyone who will teach; it is someone in whose presence you’re able to learn. The best mentors are not always the ones who give long lectures.

That said, there’s no single correct definition of a good mentor, as we all learn in different ways. You’ll have to take the initiative to meet and follow potential mentors, and find someone who resonates with you.

4. Undertake new initiatives gradually

A common mistake in the first year is to “go in with all guns blazing”. This is a gung-ho approach where you decide, from year one, that you are going to learn social media marketing, content creation, video-editing, master 10 different social media apps, and so forth.

This approach can also result in excessive spending, such as when you try to hire a web developer, videographer, image consultant, virtual assistant, etc., all in your first few months.

The intent is correct: you should aim to learn all these things, and acquire all the right help, over time. However, it is impossible to learn every single thing you should know, in the span of your first year. It’s also improbable that you have the resources to buy all the tools, and hire all the help you want.

Don’t take on more than you can handle. Pick and prioritiser one or two things to focus on, and commit your efforts to it. Over time, you will gradually develop all the skills and tools you need.

Try to do it all at once, and you’ll probably burn out before even half the year is through.

5. Collect data, and document every process

Your first few sales appointments should be viewed as data collection efforts. Even if you’re rejected, they are not a waste of time: they allow you to note down common objections, spot areas you need to improve, and throw out presentations that don’t work.

This also means tracking customer acquisition and retention costs. For example, if you use social media marketing, how much does it cost per month (in boosted posts, designer graphics, etc.) to acquire a lead? And what is the conversion rate of those leads?

Likewise, even client retention costs should be tracked. How much, for instance, do you spend on keeping existing clients happy? And what’s the rate of lost customers relative to the cost?

You can even tally data to determine what time of day it’s best to call, which demographics (e.g., age groups or professions) respond best to different presentations, and seasonal trends. You may, for instance, find that your sales pick up only after

holiday periods like Chinese New Year.

What gets measured, gets managed. Document your processes, such as sales presentations: that ensures you are not taking random swings each time – your processes are always based on the data you gather.

6. Understand the impact on financing

When you work on commissions, some institutions like banks will treat you differently. For example, many banks will require you to have worked for at least a year on commissions, before you’re approved for loans.

(Although if you save properly, as mentioned in point 1, you can avoid ever having to use credit cards or personal loans. This is always preferable.)

Likewise, some major loans – such as HDB loans or housing loans – count your income as being 30 per cent lower than the reported, for the purposes of loan approval; one of many good reasons not to under-report your income.

If you can, try not to switch to a commissions-based job right before major financing moves, such as buying your first home. Make the switch about 12 months before or after loan applications.

7. Start building alternative income streams

Most successful self-employed people do not count on a single source of income, as they know it can be volatile. It’s important to complement income from commissions with other passive sources – examples include dividends from stocks, rental from property, or vanilla bonds.

You cannot expect to live entirely off alternate income streams from year one; not unless you’re phenomenally successful. However, it’s important to explore the possibilities, and start investing early – the quicker you begin, the more stability you’ll

find. Your other income streams can supplement or support you, during dry spells.

At Exodus Capital, we provide close mentorship for new entrants into the finance industry. Whether you’re a fresh graduate, or making a career switch, we provide practical tools and actionable steps, to help you find your footing fast.

Contact us for help and to get a head start!

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