How To Start A Commission Based Business

Starting a commission-based business is a profitable idea because it is an effective business model and you earn a percentage of the revenue generated by the sales you make.

It is a nice way to earn income without having to invest a lot of money. In this article, we will discuss the important steps to consider that you need for starting a commission-based business.

9 Steps for Starting a Commission-Based Business

Step 1: Determine Your Niche and Target Market

The first step in starting a commission-based business is to determine your niche and target market. This means identifying your target market so that you can focus on the types of customers you want to serve.

You can choose a specific idea in the commission business that you are passionate about and that you have expertise in, as this will make it easier for you to sell your products or services.

We have a dedicated article that helps you decide the best niche for your commission business.

Recommended Article: Commission-Based Business Ideas

Once you have identified or selected your idea then you can research to know your target customers so that you can understand their needs, preferences, and desires. This will help you tailor your products or services to meet their specific needs and stand out in the market.

Step 2: Research and Analyze Your Competitors

You need to know your competitors so that you can understand what they are offering, and how you can differentiate yourself from them. This will help you know the opportunities and gaps in the market that you can take advantage of.

To know your competitors, analyze their products or services, pricing, marketing strategies, and customer feedback. You need to differentiate yourself and you can do so by providing unique products or services or by more competitive pricing.

Step 3: Identify Potential Commission-Based Salespeople

Salespeople will be responsible for generating revenue for your business through sales. It is important to select salespeople who are motivated and have good communication skills. They should also be knowledgeable about your products or services.

How To Start A Commission Based Business

Start by creating a list of salespeople who have the necessary skills that you need and then you can select them accordingly. Consider their experience, skillset, and ability to meet your business needs. Once you have a list of salespeople, you can start contacting them and maybe take a test to know their skills.

Step 4: Create a Commission Structure and Compensation Plan

The next step is to develop a commission structure and compensation plan. This will help you to know how much salespeople will be paid and how they will be incentivized to sell.

When creating your commission structure, consider the business standards, your profit margin, and your goals. You can offer a flat rate commission, a percentage of the sale, or a combination of both. Additionally, you may offer bonuses or incentives for meeting certain sales targets or for closing larger deals.

Also, make sure your salespeople understand how they will be paid and when. This will help build trust and motivation. You can pay salespeople on a monthly or quarterly basis, or even upfront in certain cases.

Step 5: Establishing a Legal Business Entity

This step is very important because it will protect your assets and ensure that your business is operating legally. There are several types of legal business entities such as sole proprietorship, partnership, limited liability company (LLC), and corporation.

Choosing the right type of legal entity will also depend on your business needs, goals, and budget. A sole proprietorship is a simplest and most affordable option, but it offers no legal protection for personal assets.

A partnership is a good choice if you are starting a business with a partner, but it also comes with some risks. An LLC is a popular choice for small businesses because it provides personal liability protection while still offering flexibility and tax benefits. A corporation is a more complex option, but it offers the most legal protection for personal assets.

Once you have selected a legal business entity, you need to register your business. Cyzotech always recommends contacting the official authorities for permits and registration.

Step 6: Create a Sales Process and Training Program

The next step for starting a commission-based business is to develop a sales process and training program for your team. Your sales process should mention the steps that your sales team will take to generate leads, qualify prospects, and close deals.

It should also contain metrics for tracking sales performance and a system for managing customer relationships. Your training program should provide your sales team with the skills and knowledge they need to be successful in their roles.

This contains training on product knowledge, sales techniques, and customer service. You may also want to provide ongoing training and support to help your sales team stay motivated and engaged.

It is important to establish clear expectations and goals for your sales team and to provide regular feedback and coaching. This will help your sales team to stay focused and motivated, and it will also help you to track their performance and make adjustments as needed.

Step 7: Create a Marketing Plan

To create a successful commission-based business, you need to have a clear and effective marketing plan and it should mention your target audience, the benefits of your product or service, and the channels you will use to reach potential clients and salespeople.

Here are some tips for a marketing plan:

Identify your target audience: Before you can create a marketing plan, you need to know who your target audience is. Who are the people who will be most likely to buy your product or service? What are their needs, preferences, and pain points?

Define your unique value proposition: What makes your product or service different from the competition? What are the key benefits that your target audience will receive from using your product or service?

Choose your marketing channels: There are many different channels you can use to market your business, such as social media, email marketing, paid to advertise, and content marketing. Choose the channels that are most likely to reach your target audience and align with your unique value proposition.

Create a content strategy: A content strategy is a plan for creating and distributing valuable content that will attract and engage your target audience. This can include blog posts, videos, social media posts, and other types of content that will help establish your brand as a thought leader in your industry.

Step 8: Launch Your Business

Once you have your marketing plan in place, it’s time to launch your business and start recruiting salespeople.

Here are some tips to help you get started:

Establish your legal and financial structure: Before you launch your business, you need to establish your legal and financial structure. This may include registering your business, obtaining any necessary licenses or permits, setting up a bank account, and hiring an accountant or financial advisor.

Create a sales team recruitment plan: Your sales team will be the lifeblood of your commission-based business, so it’s important to have a solid recruitment plan in place. This may include creating job postings, leveraging your personal and professional networks, and partnering with recruiting firms or job boards.

Train and support your sales team: Once you’ve recruited your sales team, it’s important to provide them with the training and support they need to be successful. This may include product training, sales training, and ongoing coaching and feedback.

Monitor and adjust your business model: As your business grows and evolves, it’s important to monitor your results and make adjustments as needed. This may include tweaking your marketing plan, adjusting your sales compensation structure, or pivoting your business model altogether.

Step 9: Continuously evaluate the performance

The success of a commission-based business largely depends on the performance of the sales team. Your sales team is motivated by the commission structure and compensation plan you offer them.

If your compensation plan is not aligned with the goals of your business, it can negatively impact your sales team’s motivation and ultimately affect your bottom line. Continuously evaluating and adjusting your commission structure and compensation plan can help you stay competitive, keep your sales team motivated, and ensure that your business is profitable over the long term.

Here are some tips on How to Continuously Evaluate and Adjust Your Commission Structure and Compensation Plan:

Monitor Sales Performance and Business Metrics: The first step in continuously evaluating and adjusting your commission structure and compensation plan is to monitor sales performance and business metrics. This can include tracking sales revenue, conversion rates, customer acquisition costs, and other key performance indicators.

By analyzing this data, you can identify areas where your business is performing well and areas where it needs improvement.

Gather Feedback from Your Sales Team: It’s important to gather feedback from your sales team regularly. This can include feedback on the commission structure and compensation plan, as well as feedback on other aspects of the business. By soliciting feedback from your sales team, you can identify areas where you can improve your compensation plan and keep your sales team motivated.

Stay Competitive: You need to stay competitive in the market to attract and retain top sales talent. This means you need to keep an eye on what your competitors are offering in terms of commission structure and compensation plans. You may need to adjust your compensation plan to stay competitive and ensure that your sales team remains motivated and engaged.

Experiment and Adjust: You should be willing to experiment with different commission structures and compensation plans to see what works best for your business. This may involve adjusting commission rates, introducing new incentives or bonuses, or tweaking other elements of your compensation plan. By experimenting and adjusting your plan, you can find a structure that is sustainable and profitable for your business.


Starting a commission business can give many benefits but you need to follow the steps carefully. Creating a good business plan and promoting your business on social media platforms such as Facebook, Instagram, and even youtube can help you to generate more sales. So, good luck with your venture, and hopefully this article will help you start your commission-based business.

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