Passive income is a MUST for commission paid salespeople (This is Why)

Updated: Jul 22, 2019


|The commission compensated sales professional.


Working under this structure as a W2 or 1099 can be extremely lucrative for someone, and for good reason as most of the roles are not for the faint of heart. Think: headhunters and recruiters, brokers, med device, insurance, pharma, software, real estate, advertising and more. The common theme here is high dollar industry, high dollar payout, and high stress environments.


The compensation models vary from role to role and industry to industry with a mix of base + commission, commission only, scaled commission and more. The common theme again here is for the most part, an unlimited upside potential in earnings. For instance, it’s not uncommon for the top performing headhunters to earn more than the executives they recruit and place for clients. Top brokers and agents are commonly known to bring in multiple six figure incomes in a calendar year.


|So what does someone do with that?


Typically people that are in and succeeding at these types of positions are extremely outgoing, driven, and competitive. They tend to not leave much time for themselves or side projects. If ones not careful as they steadily rise up the earnings ranks, their lifestyle will have a habit of rising right alongside them. Enter the luxury car, the country club, the new house, the dinners out, etc. etc. You get the picture. This is all fine in moderation, but sales people need to be careful about trying to “keep up with Jones’” and running their expense rolls too high. Most of these commissions are transactional and need to be re-invented and re-sold over and over and over. A sudden loss of product, change in market, or even worse, a change in % commission structure, and things could turn south. All that potential upside in unlimited earnings must come with a downside, and that downside is no guarantees. It could all change from 1 year to the next.


Enter Passive Income.


1) By directing these commission income streams into passive income vehicles, salespeople can begin to “hedge” their potential rough years and downside. This can also be a motivator for a salesperson as they are able to view their FTE job as “the bank” ,taking the earnings from the job and pouring it into passive income streams. The fire is whichever passive income bucket one prefers, and the gasoline is the commission streams. Do a great job, make the commissions, direct into passive streams to grow, rinse and repeat. By applying this model, a good commission salesperson not only protects and grows that income, but also changes their mindset from a producer and spender to a producer and investor.


That might be worth repeating: changes their mindset from a producer and spender to a producer and investor. See Rich Dad Poor Dad for more on this.


2) The golden handcuffs.


Many have heard of them, fewer will experience them. The golden handcuffs can apply to a variety of earnings, deferred earnings, retention bonus etc. in the world of work. For the sake of this article we will stick with the premise of a highly paid, highly worked, commission driven salesperson.


Remember the high earner we talked about a bit earlier who was running their expenses and lifestyle up and up and up? Let’s say that was Bob. Well Bob is now 15 years in and completely burn out. No more passion for the sale, the clients, the role. Bob Never has time to be at home with family or free time with friends. His income is still quite high but he’s not happy and wants out, wants to ease up and do something else but he can’t. The snowball of expenses has gotten too large and the only way to keep it all together is to keep churning on, keep earning those commissions. Year in and year out.


What if Bob would have been utilizing passive income streams all those years? He just might have enough cash flow to walk away and pursue the path he has always wanted.



In conclusion, commission driven sales people are among the best group set up for financial success. They need to be careful how they manage this success and look to decrease expenses and increase revenue generating assets. Some may choose to work the commissions for life, and others, well they just want the handcuffs off.



We’ve been helping successful salespeople implement this model for years with private cash flowing investments in commercial real estate, and are always looking for the next one to help on their journey!


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Shane@RedRockCapitalGroup.com  |   215-262-8083

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