Decoding 1099 vs W2 Sales Positions: Diving into the Pros, Cons, and Best Choice for your Career | SOS Ep. 345

Are you ready to unravel the complexity of 1099 versus W2 sales positions? 

We promise to provide you with a comprehensive understanding of both roles, their perks, and their pitfalls. Join me, Mike O'Kelly, as I break down the intricate world of sales positions, shedding light on the pros and cons of both. We kick off with why W2 positions tend to be more suitable for those new to the field, thanks to the training support and financial security they provide. We also touch on why 1099 sales roles can be an excellent choice for industry veterans seeking supplementary income.

Transcript

Speaker 1: 0:01

Welcome to the Surviving Outside Sales podcast. I'm your host, mike O Kelly. As I kind of teased yesterday, today's topic is going to be something that happens a lot. A lot of talk in the sales world, sales industry 1099 versus a W2 position. So I see value in both okay and right off the jump. I just want to tell you my personal belief is, even if you have a W2 position, you should be having 1099s. You're working on on the side. Now I would not do that at the beginning If you were starting at your sales career. If you're starting out with a new company, new product, new territory, what have you? If you aren't well established, do not do a 1099, okay. Put all your energy, all your focus, all your skill development, attention into the 1099, okay. But I do believe that you should have something that you're thinking of, maybe something that's complimentary things you can sell to the same people. I don't really believe you should be doing 1099 work during the day, like you shouldn't go into an office and sell your W2 position and then all of a sudden turn right back around and sell your 1099. So I know it's happened before, I've tested it out. It doesn't really work because what happens is your buyer then starts getting confused on what you're representing. Okay, so I've done it before. I've tried. I said, oh, you know what, I'm calling on dermatologists. Maybe I'll pick up a dermatology line. It doesn't work, okay. But that doesn't mean you can't do something else on the side, like write a book. You can't do a side hustle, you can't build up a skill set, start a podcast.

Speaker 1: 1:47

Really, just 1099 is a commission-only position and there are some states that make differentiations between an independent contractor and 1099. Just Google 1099 versus independent contractor. There are some nuances. So 1099 is kind of doing an unpaid job and really with a 1099, it is. There's a beginning and an end and the true 1099 is really supposed to be. You are doing a set job between set a timeframe. So, for instance, for the next six months you're doing X, y and Z and that's your job description. An independent contractor is just somebody that's doing work but they're not getting paid. There's no beginning, there's no end. Really, it's just kind of they're there Now each state there is a little bit of nuances to just look in your state and see if you're listening.

Speaker 1: 2:39

We do have people that listen from outside of the United States. I have no idea what the laws are around the world. So just Google your local municipality to make sure that you're on the right track. But I'll tell you my opinion, you know.

Speaker 1: 2:53

So, like I said, if you're starting out, do not do a 1099. Okay, a 1099 is going to be for a veteran, it's going to be for somebody who has developed a skill set and can move very quickly and has the ability to scale very quickly. You don't want to start out as a 1099 because you're going to take some lumps. So you want the risk and the onus of the pressure to begin on the employer, the person that's hiring you, because then they have to have a vested interest in training you. Okay, and that's one of the first pros that we're going to talk about with the W-2s is, with the W-2, you're not having to pay for everything, so there's a much lower financial risk to you. The risk lies on the company that's paying you, because they're basically trading your future earnings for payment today. So if you're starting out, always recommend get a W-2 job and get somebody with good training. It's also very consistent. You're going to get paid every two weeks or you're going to get paid once a month or every 15 days. That's very consistent and what that does is it allows you to start to build out how you're going to pay your bills, your mortgage, et cetera, plan for trips and vacations. It's also super steady. There's some comfort knowing that somebody else is looking out for you and they want you to succeed.

Speaker 1: 4:17

There's a belief that when companies hire you, they're just looking to fire you and they're micromanaging you and oh, they're just trying to document. No, they have invested a lot of money. In fact, the average sales professional, the investment a company makes is about $15,000 to hire you. So they've already sunk 15 grand into you on average before you even walk out into the field and sell. So just realize that they've invested in you. That means they're invested in your success. They need to recoup that money or it's a loss and it's going to make them look bad. So that's one of the benefits of the W2. It's also, you know, w2, the company's got money, they have resources, there's probably some track record, there's some stability behind the company and you know, like I said, w2 is a great for certain types of people.

Speaker 1: 5:16

You know, when you're beginning in the sales industry, 100% the cons of W2 is once you get to a certain age. You will always answer to your bosses and your boss's bosses. Every boss has a boss, okay, even the owner of the company has a spouse, all right. Even the owner of the company might have investors, a board of directors, somebody that they have to answer to, all right, so they have got bosses. Which means that if the numbers aren't looking good, shit rolls downhill and the sales reps are always the ones that collect the crap.

Speaker 1: 6:02

You don't get a lot of time off in the beginning. I mean I remember at Enterprise shoot, I think I got like six PTO days for my first year and I had to earn those. So I don't think I had a PTO day for the first, like six months, which is fine. Look, you're young, you're aggressive, you want to go out there, you want to learn. You don't need time off. Physically you can do it, you know, but it's restricted, you know you get your time off. That's not the same when you are working for yourself, but we'll talk about that in a second.

Speaker 1: 6:33

There's not a lot of career progression training. You know they're not gonna train you. Most companies aren't gonna train you in the sales world to go work for someone else, and I do believe that is a big flaw in the industry. Companies on average only spend about $2,000 on training and they're not investing enough in their people. Usually that training is just to get them out the door and to sell, and then they hand off that training to the district managers or the regional managers, which it's too big of a job. There needs to be more than just that. You're gonna have capped income potential, as I mentioned I don't know if it was today or if I mentioned on the podcast episode yesterday there are going to be capped income potential because they're trying to recoup future. They're recouping money in the future for money they paid out to you today.

Speaker 1: 7:33

Like I said, right when you start your first day, they're already in the whole 15 grand. That's what it costs to invest to hire you through the hiring process. Possibly recruiters get you up and running, get your territory going 15 grand. They need to recoup that plus whatever you are costing them. And just remember what you're costing them is not just the money that you're making. There's also support staff. There's also things going on in the background that you have to be aware of. So I've heard it anywhere from two to four X. Whatever your salary is, that's your true cost to a company. So if you make $100,000 a year to your company, it's upwards of about 400,000 that you cost the company in potential earnings, overhead support, staff training, supplies, et cetera.

Speaker 1: 8:32

The amount of effort that goes in at W2 companies is substantial and you have to understand that. And companies aren't perfect. They're not gonna be able to provide everything and they're doing their best, okay, but you have to realize that going in, besides that, there's gonna be the cons of the W2, there's gonna be micromanagement from above. As I mentioned before, everybody's got bosses, so Everybody above you isn't directly selling. Think about that. Everybody above you is not directly selling. Now there might be things like national accounts or you might have some executives that have they know hospital owners and they know business owners, but for the most part the boots on the ground are the sales reps and so if you're not getting it done, they're going to be on you to get it done and they want 100%. The cons of a W2 is they want 100% of your effort, your energy and your time. Okay, and I believe that you owe it to them to do that. Now.

Speaker 1: 9:38

I don't think that they should limit you from doing a 1099 on your personal time. Your personal time is when you are not engaged with that organization. So nights, weekends, if you take a PTO day, you can do whatever you want with that PTO day. It does not matter what you do. So that's a con is that they view you as property. Really, they view you as property and they've invested in you, so you're a stock, you're a stock and they're either going to sell you or they're going to buy more of you.

Speaker 1: 10:15

Okay, this activities unfortunately get prioritized over productive, protective Excuse me Ah, I got tongue tied Productivity, okay, and I'm all about productivity, not activity. And that's why it pains me sometimes when companies, when they don't hit the sales numbers, the first thing they say is let's up the calls, let's do more dials, let's pound the pavement more, let's work more hours, let's require more, as opposed to looking to ways to be more productive. It's just more, more, more, all right. So those are the pros and cons of W2s. Now we're going to talk about the 1099 pros.

Speaker 1: 10:52

Okay, you don't have a manager or boss looking over your shoulder. Now you might have some stipulations of your contract that you might have some light activities, but in most states it's illegal to mandate what a 1099 does so you can't say, oh, you're doing 1099. Well, you've got to do X, y and Z or you're not eligible. Nope, that's not what a 1099 is. You can't mandate anything. You can give guidelines, you can give suggestions, but you can't link activity to payment. It's illegal in some states I don't know about all states, but states I've lived in and I've worked in, I've been in 1099 it is illegal. You cannot mandate anything. That is not an employee of you. Okay, you are having outside work. It's like a consultant. You're giving them a task and they are working on that task on their own. That's how it works.

Speaker 1: 11:45

You can add. A good good thing is you can add multiple products and revenue streams Simultaneously. In fact, there's a buddy of mine. I need to, I really need to have him on the podcast if you're listening. His name is Dalton King. Let me say buddy. I mean you know I've worked with him briefly in the past, haven't really Haven't really talked to him in a couple years, but I hope he's doing well.

Speaker 1: 12:05

If anybody knows Dalton King, st Louis, missouri, he's the king of all 1099s that I know. I'd love to have him on the podcast. In fact, I'm gonna reach out to him and have him on, because I want him to talk about the whole 1099 independent contractor being your own boss, Because he has done this and he's lived it for shoot almost 20 years, so he's gonna be a great person to have on. In fact, I'm gonna start having on people who are running 1099s they're doing independent stuff because I want you to hear both sides. I don't want you just to hear my opinion. I want you to hear the opinion of people who are living it as well and in different types of industries and give you some ideas, because that's really what I want you to do. I want you to open up your mind to the possibility of 1099 and W2s. Again, I'm not anti W2. It's just everybody's talking one way W2, w2, w2, 1099s can make you a lot of money. So Dalton King, st Louis, missouri anybody knows them have them, reach out or I'm gonna reach out to him shortly so you have the freedom and flexibility as a 1099,.

Speaker 1: 13:05

You know, if you decide you wake up one morning and you're just not feeling great, you don't have to take PTO, you don't have to count and say, oh crap, do I use it today? Or just go out in the field and make calls. If you don't feel great, don't do it. You also can have much better work life balance. I believe that a work life balance is work as hard as you can during business hours and then, when you're having family time, Be as present as possible to be with your family. That's work life balance. I don't need to have you know X amount of hours a week where I just kind of kick back and do that. No, I'm I'm a workaholic. I love to work, I love to build things like that.

Speaker 1: 13:39

But you get that freedom with the 1099. When you don't have a boss. There's nobody over my shoulder, okay, except for me. There's nobody over my shoulder saying, hey, how many podcast episodes did you do? Hey, how many guests have you booked? Hey, how many, how many chapters of your course have you have you completed today? Okay, nobody's over my shoulder doing that. I am doing that myself every day. I've got a plan and I'm going through my plan. I work my plan daily. That's the freedom and flexibility that I have with what I'm doing you have.

Speaker 1: 14:10

You only focus on revenue generating activity. You don't have to update CRM notes. You don't have to send over BS reports Well, reports that I think are BS. You know, you don't have to be on conference calls every week. That could have been in an email. Everybody knows what I'm talking about. Almost every conference call for regional meetings could have been done in an email. And really, with the.

Speaker 1: 14:31

One of the last big pros is with the 1099, you can Control your destiny. You control your destiny. You're gonna rise and fall to the level of your talents and your work ethic. I can live with that, okay. I can live with that. 1099 cons, okay. So here's the other side. I'm telling you the truth. All right, 1099 cons. There's no security net. There's nothing to fall back on, there's no investment.

Speaker 1: 15:06

So either you're working for yourself or you are being paid by a brand to represent their product. You are not getting anything up front. You don't make money until you make a sale. That is tough. You have to really be mentally tough. You have to have perseverance. You have to be physically tough as well. You have to build almost everything. There's not going to be a whole lot of infrastructure for the most part. Sometimes there are, and, if you like my friend, jennifer Jones, who runs her business with Scout and Seller Wines in fact, at some point I'm going to be joining. My wife and I are going to be joining Jennifer. Don't know when that's going to be. We both need to have bandwidth, which we don't have right now, but my wife is very interested in that.

Speaker 1: 16:01

We tried the coffee and we tried the wine and both are fantastic and those are the two things that my wife and I really like to have. A good glass or cup of is a good cup of coffee. It's also clean. That's not filled with mold like a lot of the coffees around the world. I hate to break it to you. There's a big brand. It starts with the star, ends with the bucks. There's mold in all their coffee. I digress, but she I'm going to have her on the podcast again. I had her on one time. Go back to the Jennifer Jones episode from, I think, january I don't remember the specific episode but go back in January and listen to her. I might have her on again and just strictly talk about 1099s and the freedom that her life has now as opposed to when she was W2 employee.

Speaker 1: 16:46

You have to build everything, but you have to build your business and it's less consistent. You're not getting a paycheck every two weeks unless you sell. Every two weeks. You have to go make it happen on your own, and I do think that some people are better to be employees and not bosses. They're better to be employees and not managers, so it also comes down to your personality. I love to build and I love to run things. I love to create, and so I'm not necessarily as good as good of a fit now to be an employee. Quote unquote. I like to run my own stuff.

Speaker 1: 17:25

It's okay to be within a structure, like, again I mentioned, I've got a franchise that my wife and I bought, but the franchise is not there on the day-to-day basis telling me to open the door, do this, do that. It's going to be running. That franchise is going to be very similar to when I was running enterprise stores. The difference is that, instead of me getting a small commission every month from the revenue, I'm going to be getting a lion's share of it. So that's the difference. And so not all W2s are and 1099s are created equal. There are some W2s that are great and there are some W2s that are not.

Speaker 1: 18:03

Again, if you have a W2 job, what I would do is I would look for W2 jobs where you have uncapped commission in an industry where they are consumable or high ticket. I sold radiation machines. Those were high ticket. You want to sell high ticket because you get high commission, also consumables. That is one of the reasons why I wanted to start selling the post procedure kits to plastic surgeons, dermatologists. It was consumable, it was a low ticket item, it was a small price. But they were ordering over and over and over and over again. So I was getting repeat business over and over and over again. I was having an opportunity to build advocates and indoctrinate them into the product, into my world, into my business and have them help to sell other people, which they did. So there's a couple of different things you can look at.

Speaker 1: 18:54

But you really want to know are you in a high ticket, high commission type role where you're not going to sell as many but when you do, the rewards are huge? You sell a half a million dollar radiation machine. There's going to be a big commission. It's a lot bigger than selling a bunch of silicone tubes like I did. But you just want to kind of see what is the opportunity and really kind of dive deep into it and then think to yourself what type of sales position do I want to have? Do I want to have a half a million dollar where I'm selling five million? Can I sell five million of what I'm selling right now? The answer is no. Or you have a cap commission. You might want to look at a 1099. And maybe test it out on the side.

Speaker 1: 19:41

Maybe it's not in the same industry, maybe it's different, maybe it's a passion. You know there's three things that really help. I know it's not really on topic, but there's three things that really help in life. You need to have a passion about your work, you need to have passion about a hobby and you need to have passion about your health. Okay. So I think if it falls within one of those three things for instance, building out the restore hyper-wellnesses that is about my health. Okay. So it's within the world of what I'm trying to build, because it's within my job, my career, it's within a hobby and it's within my health. So if you use those three parameters for finding the right type of position, opportunities are going to start opening up and you're going to see the path forward that you need to go.

Speaker 1: 20:31

So thank you so much. Really, do appreciate it. If you want to talk about your role, your position, you have questions about W2 and 1089,. Dm me on LinkedIn and we can have a conversation about it and I can do a free consult, maybe a position audit, and kind of give you some ideas about what you want to do. I've done this for dozens of people now almost 26, 27 people now. I've done this this year, in 2023. So I'm happy to do so. I'm going to meet with some of the people that are listening to the show as well. Reach out to me, dm me on LinkedIn, or you can reach out to me. Mike is surviving outside sales. Either way works. But thank you so much, really do appreciate it. Hope this was helpful and I'll see you next time. Surviving outside sales.