Salespeople can be independent contractors or they can be employees. For many, the advantages of becoming an independent sales representative far outweigh the disadvantages of working as a W-2, salaried sales rep. Before we jump into the details surrounding whether or not there’s a clear winner, let’s clarify some distinctions between the two.
What is a W-2 Employee?
One of the main differences W-2 employees encounter is the control employers have over their work. W-2 employees usually arrive to work and leave the office at a particular time and complete their tasks by deadlines and parameters set by the employer. Typically, the individual works full-time and receives a salary with accompanying employer benefits. Working as a W-2 sales agent does offer perks like leads being generated for you, but on the same hand offers almost zero room for financial freedom in a long-term capacity. In fact, W-2 sales reps oftentimes are operating on a commission-driven pay plan but it's mislabeled as a no-risk, base + commission role. This leads to a critical question you should be asking yourself as a W-2 commission-driven rep, do you have room to grow? Are you able to have more than one iron in the fire? Can you represent other employers and diversify your portfolio? It’s unlikely as a W-2 sales rep that you would answer yes to any of the aforementioned questions and have likely signed a non-compete with your current employer - leaving little room to not just grow but flourish financially.
What about a 1099 Independent Contractor?
An independent contractor, on the other hand, exercises greater freedom. Instead of working full-time for a yearly salary and benefits, they can set their own schedule and income potential based solely on their terms. They can also be more flexible with the positions they choose to accept, with the flexibility oftentimes allotting them to work for multiple clients as opposed to a sole employer.
Should you be a 1099 Sales Representative?
Independent sales reps are often coined self-employed entrepreneurs living a lifestyle and earning a living solely designed by them. They must be self-starters, natural at marketing themselves and their business, and highly motivated.
If you read the above description and didn’t feel those attributes pertained to you, then you may be looking for more of a comfort zone filled with pre-structured sales that base salaries and W-2 positions provide. While unlikely that you will own your residuals or be able to keep your book of business in a W-2 position if you leave that company, you are more able to rely on a base salary and leads chosen for you to close.
Looking to answer only to yourself and close deals deemed worthy by you? Let’s cover the advantages of selling as an independent sales representative.
1. You Are Your Own Boss
Being an independent sales agent means you answer to no one apart from yourself. You can choose how, when, and where to work, for as much or as little time as you want. Independent contractors are masters of their own economic fate. This is not necessarily the case for salaried employees. Independent contractors aren’t required to ask their bosses for a raise, their income potential lies in their own hands. And, because most 1099 sales reps are not dependent upon a single company for their survival, the hiring or firing decisions of any one company don't impact independent contractors like they do employees. Their employment status is their decision, which is powerful in today’s unpredictable employment market.
2. No Income Ceiling Limitations
As a W-2 employee, your income will always be based on the predetermined pay scale for that specific position, or what some higher-up determined. This can be frustrating as a sales representative feeling bound by limits or corporate budgets. It's challenging to stay engaged at work if you know that your extra effort isn't worth more than the person sitting next to you that may be underperforming compared to your work ethic. But with commission work offering uncapped potential, you know that the harder you work, the more likely your paycheck will reflect that. As an independent contractor not being constrained by income limits, the book of business you build and residuals you earn, are also yours to keep - even after saying goodbye to that role. So, not only are you setting yourself up for success in the time being, but you’re also cultivating income streams that will follow and benefit you far after you’ve stopped selling.
3. Greater Freedom and Flexibility
A few of the major perks of being an independent sales representative are freedom and flexibility. As mentioned, you’re likely able to set your own schedule and location - meaning the days of missing out on an important event for family or friends is a thing of the past. Compared to a normal 9-5, work-life balance is attainable and affordable. Looking to make a big purchase? You can work the hours you need for success. Just landed a big sale? Relax, take a vacation, your time is yours! Not only will a commission-based opportunity afford you a work-life balance, but it also offers flexibility within your professional life. There are no sales territories limiting your reach and no quotas dictating your days. You encompass the freedom to decide what leads and sales are worth your time and efforts. You have the capability to decide what clients you’d like to work with, and can promote yourself and your business on your terms.
4. Security and Peace of Mind
Because of the ample flexibility and opportunity to keep your options open to sell for multiple companies, being an independent sales agent offers peace of mind and security - ensuring you don’t put all of your eggs in one basket. As an independent sales rep, your survival is not reliant on any one company, which is a serious advantage in today’s employment market. Take for example the event of a merger or acquisition, as an independent agent you have the freedom to retain your residuals and book of business no matter the outcome that unfolds. On the other hand as a W-2 employee, the sales rep is not able to retain their residual commission when the company decides to go a different direction. That could be corporate downsizing, not meeting quotas, or even a merger or acquisition event. What happens to the hard work that you've completed to date? Did you sign a non-compete, preventing you from talking to your customers? Do you have to find a new industry or geographic area to work in? The employer has full control over these details and what happens to you after your employment comes to an end with them.
Depending on who you talk to, getting the same paycheck every two weeks can be comforting - or frustrating. Some people who stay in salaried positions for years often end up feeling like their efforts don't match their compensation, and that 2% yearly raise isn't exactly life-changing. On the other end of the spectrum is commission-based work, which presents unlimited earning potential, but with no safety net of a base salary to rely on. In short, commission jobs are not for the faint of heart, but those with the right skillset and determination consider them well worth the risk.