How Much to Pay Yourself as an Independent Sales Rep

On occasion you may have an idea which makes a small shift in your perception and can have a huge impact on your life and business.  I hope this discussion today will prove to be a revelation like that to you.  How much should you pay yourself as a 1099 sales rep?  Most of my readers will think that is an unnecessary question since your pay IS the commission which you get as a 1099 sales rep.  That perception is a huge mistake.  You need to leverage the way you pay yourself; this will give you much greater incentive.

You should set yourself up as a business, whether sole proprietor or S Corp.  An attorney or perhaps even a Google search can help you research the best way to do that for tax purposes.  There are two levels of structuring payments to yourself, no matter which entity you choose.

1. Weekly pay. Open two separate accounts.  Then make a realistic assessment of your minimal viable budget.  Discuss this with your spouse or significant other, especially if you are just starting a sales career.  You’ll need to minimize all expenses.  This should be the “bare bones” amount for survival.  Choose a weekly amount, not daily.  You must not allow yourself to think, “I just made $200.”  Rather, you should know that you’ll get paid the predetermined amount on a predetermined day of the week.  This should be the case no matter how much your business just made.
2. Profit distribution. Always leave enough money in your business account to cover your weekly pay for two or three weeks.  If your weekly pay amount is $600, then your minimum balance in the business account should be $1,800.  Then in the event of slow weeks in sales, you can be assured of getting paid.  Perhaps at the end of a month the balance in your business account is $3,600.  You can pay yourself a profit distribution of up to $1,800, depending on other necessary business expenses.

If this is a new concept for you, the transition may seem very difficult in the beginning.  However, by structuring your pay this way you’ll realize some great benefits.

• You’ll be highly motivated to hit that $600 a week! If you are consistently paying yourself $1,000 or more monthly in profit distribution, you might decide to give yourself a weekly raise.  You could divide the profit distributions so that you’re getting another $200 per week.  As you slowly achieve raises in weekly income, you’ll soon be thinking, “I’ve got to make sure I at least make enough sales to hit that weekly income.  That’s what my spouse and my family expect, and we have a house payment to make.”  This will help motivate you in consistent sales.
• You’ll eliminate financial stress for your spouse, thus building more trust in your relationship. You should do whatever necessary to hit that payroll number, even if it adds some stress to your business. In my merchant services business, I would prefer to do a buyout or a residual loan if necessary to hit payroll.  Although both of those are generally bad financial decisions, I would prefer longer term stress on myself than stress the family.  By relieving the stress of family, I have greater freedom and focus to run my business.
• You’ll be motivated to get the extra sale and a bigger profit distribution each month. Knowing you’ll have extra income at the end of the month is a great gift to your family.  You’ll build great self-confidence and good thinking patterns about your business.

Are you saying, “James, why would I go through all that pain in the neck?  I just get paid right now into my account.”  Trust me.  Try this.  After the initial adjustment period is over, you’ll find this structure has done something to your brain.  It will cause you to realize you ARE running a REAL business; it will help you perform at a much higher level.

Hopefully this article helps you today.  Try it.  I promise you are going to love it if you do!

My name is James Shepherd.  Thanks for reading!

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