How Should You Pay an Outsourced Commercial Team?

Most commercial partners are paid with a mix: some fixed cash up front to keep the work running, and a variable share tied to results, usually commission and sometimes equity on the back end. It can't be all equity, because people and tools cost money every month. The best structures make both sides win at the same time.

Why can't it be all commission or all equity?

Founders short on cash ask me this a lot. My answer is that there has to be some cash flow. Even before anyone is paid for their time, the data, prospecting and automation tools for outbound selling run about $1,000 a month. That money comes out of somebody's pocket on day one.

So the usual shape is cash and a little profit up front, and equity or commission on the back end. When the partner sells something, you win. When you exit, the partner wins. That is the whole design, and it keeps everyone pulling the same way.

A fair fixed fee should cover the partner's real costs and leave a little in the system. The rest should be variable. If a partner wants most of the money fixed, they are asking you to carry the risk that they don't perform.

How do commission and fixed pay trade off?

Commission on a contracted team runs higher than what you'd pay a W2 rep. That surprises people until they see the other side. You're not paying a salary. You're not paying for their car or their insurance. The reps only get paid when they sell something.

Commission-only 1099 reps look like the cheapest version of this, and they are an option. But you can't force them to use your sales process or to put anything in your CRM. You hope they do things the right way. A contracted team with your systems behind it gives you more control for the same variable spirit.

Compare that with building it yourself. A fully burdened chief commercial officer can cost $500,000 to $700,000 a year. A VP of marketing can add another $300,000 to $500,000. That is two people, before you've hired a single rep.

Whatever the split, you should own the CRM, the customer data and the customer relationship. A good partner acts as your sales agent, not a distributor who owns the account. The hospital or the practice still buys from you. That ownership is what lets you change the deal later without losing your market.

Where does equity fit?

Equity moves with belief. If a partner really believes in your product, they can take a little less cash and ask for a little more on the back end. If they're less sure, they'll charge a little more cash and take less equity. Watch which way a partner leans. It tells you how much they believe in what you're selling.

One limit worth knowing: don't offer a percentage of your capital raise to someone who isn't registered to take it. I turn that down myself, because I'm not registered.

How do you keep the up-front cost low?

Start with time and materials on the front end, so people can get moving while the costs stay very low. Then pay in phases tied to results. Phase one might be appointments set. Phase two might be deals closed. Each phase is a checkpoint where you decide whether to keep going, and the partner knows exactly what earns the next payment.

If you're not winning, we're not winning.Terry Coutsolioutsos

Where to start

Before you talk to any partner, write down three numbers: the monthly cash you can commit, the commission you can afford on each sale, and how much equity you'd give for a real path to exit. Then ask the partner to propose phases, with a clear result at the end of each one, and confirm in writing that the CRM and customer data stay yours.