When to hire a freelance sales rep (and how to pay them)

Ready to scale your business but don’t have the cash to pay a full-time sales rep? A freelance sales rep may fit the bill. 

A freelance sales rep is a 1099 employee and a form of outsourcing to use an independent contractor to sell your product or service. 

If you’re just hearing about it, you’re not alone. However, this model has existed for a while.

In fact, this topic came up in a recent episode of Pavilion’s Topline podcast. 

Sam Jacobs reported, “We’ve been experimenting with sales outsourcing and have had great success with it at Pavilion.”

Asad Azman, Sam’s Co-Host and CEO of Sales Talent Agency, also shared, “Force Management’s entire sales team consisted of former CROs making $500-600K. Consequently, Force Management grew substantially because they had the best people talking to their customers.”

As you can see, outsourcing sales can be effective.

Still, we had questions. What types or stages of companies is a freelance sales team most suitable for, and who makes the best reps?

For help, we connected with SalesStar USA Founding Partner and Practice Leader Frank Niekamp. Frank oversees a group of clients for hire as 1099 sales associates and has firsthand experience hiring contract, or what he calls “Uber,” sales reps.

According to Frank, although hiring for freelance reps has slowed overall, there are still growing companies and startups that don’t have the capital to hire a full-time sales rep. And if that’s the case, this might be the solution they seek.

Below, we’ll look at the pros and cons of this model, when to hire freelance sales reps, and how to hire and pay them.

Let’s get started.

Pros and cons of this model

There are many benefits to hiring freelance sales reps and a few drawbacks.

The positives of using 1099 salespeople include:

• Sales expense becomes a variable expense: Freelance sales reps are 1099 employees who are most frequently only paid when they sell something, directly tying sales expense to revenue — although some may work for an hourly rate. This eliminates the return on investment (ROI) lag experienced when employing a full-time sales rep.
• New salesperson ROI is immediate: Contract salespeople aren’t an expense, whereas a full-time employee in sales is an expense until they become fully ramped. When a new full-time salesperson is hired, business owners are looking for an ROI within 9-12 months, but it may take up to a year and a half to cover their overhead.
• Improves cash flow: Outsourced sales reps are only paid when they generate revenue, simplifying cash flow.
• Staffing flexibility: Using freelance salespeople gives you flexibility as you scale your business, navigate seasonal requirements, or expand into new markets.
• Existing relationships: 1099 sales reps often sell for multiple non-competing businesses that appeal to their existing network of prospects. This offers the potential to sell to the contractor’s existing sales contacts.
• Less training: Freelance salespeople have a depth of prior selling experience, requiring minimal training.
• Shorter ramp-up time: 1099 sales reps are often semi-retired individuals and professionals with years of experience.
• Longer potential tenure: Unlike traditional sales reps, who may only stay in a role for up to two years, freelance reps are often available longer since they aren’t looking to advance their careers.

Now, let’s look at the negatives:

• Less dedication: Contract sales reps often sell for more than one business, so they aren’t investing as much time promoting your product as a full-time employee.
• Reduced output: Time investment and results will vary by rep for the same reason as their level of dedication.
• Retention varies: Although you may be able to retain freelance sales reps longer, it depends on how well they sell your product, their specific situation, and the length of your sales cycle. If they sell your product well, they will likely be easy to retain. But if they don’t have sufficient savings and your sales cycle is longer than 90 days, you may experience a high turnover rate since they likely need steady pay.

When to hire a freelance sales rep

So, when should businesses consider hiring a contract salesperson?

Frank said, “I see 1099 reps as a better fit for a small business looking to scale. They don’t have the cash reserve to hire a full-time employee and are still working through some proof of concept. As a result, they don’t want the funding to run out before they find a concept that actually works.” 

He added that companies with shorter sales cycles work best for this model.

How to pay a freelance sales rep

If you decide to hire contract salespeople, they are typically paid a straight commission. 

“This will vary, but generally, you eat what you kill,” Frank said. 

Some of the commission-based structures that Frank has seen offered to 1099 sales reps include:

• Compensation for activities completed within the sales process, such as booking meetings, creating opportunities, or creating proposals.
• Commissions are paid if an opportunity converts to a closed deal. Commission percentage rates will vary by industry and margin levels of product. In SaaS, for instance, gross margins are double what a manufactured product would ever be able to capture. For example, manufacturing has margins in the high 30s and 40s, whereas SaaS margin rates are typically double that.

“The common thread is that compensation is generally higher for 1099 contracted employees and at least 1.5x to 2x the commission rates of a full-time employee,” said Frank.

Additionally, consider the following challenges when compensating freelance sales reps.

 “It’s not difficult to hire a 1099 salesperson. That’s the easy part,” said Frank. “Plenty of people are willing to work more independently with less predictable income in the first 90 days.” 

The sales cycle is where this becomes challenging. 

“If your sales cycle is so long that you can’t compensate your 1099 rep within 90 days, you won’t be able to retain them,” Frank said. 

To overcome this, Frank suggested rewarding behaviors like booking meetings or achieving a milestone you want to capture versus paying out on closed/won deals. 

How to hire a freelance sales rep

Ready to hire a sales freelancer? Follow these best practices.

First, before you hire a 1099 sales rep, determine what you want to achieve.

Then, based on your goals for your engagement with the freelance sales rep, you need to identify the key traits of an ideal candidate. For example, you might consider:

• A seasoned sales rep with experience selling products or services similar to yours with an established network of prospects they can contact
• Somebody with an established track record of success in yours or a similar industry
• Excellent communication skills
• Agreed-upon rates upfront

From there, decide where you will look for your freelance sales rep.

There are various places to look for the right professional to fulfill your requirements. Where you look will depend partly on the product or service you want to sell and your goals.

A few examples of where to find freelance sales reps include:

SalesStar, where you can work with Frank and his team to find the best rep to meet your needs and how to set up the best possible model.

Other options include agencies like Patrice and Associates or sales outsourcing companies like TheSalesConnection.com, Exceeders, or CommissionCrowd. Plus, there are job boards such as LinkedIn and Upwork where you can advertise your requirements.

Should you hire a freelance sales rep?

Freelance sales reps are a great way to scale your business or meet short-term selling requirements.

If your sales cycle isn’t too long, there are more benefits than drawbacks. And for a small, growing business, contract salespeople are paid straight commission is undoubtedly a huge plus.

Consider your goals before hiring a 1099 salesperson, and create a list of essential attributes to simplify your search. These steps will help you find the best rep to fulfill your selling needs.

Lastly, if you contract a sales team, use QuotaPath to run sales compensation management more effectively. 

Start a free trial or schedule time with our team for help figuring out your sales models and compensation structures.