How much does an inside sales rep make? What kind of compensation can aspirants expect if they enter the inside sales profession?
According to a survey conducted by PayScale.com, inside sales representatives in the United States receive an average annual pay of $41,000, the average already including spiffs, bonuses, profit sharing and commission. The average compensation received outside salary could get as high as $15,000 to $24,000 for every salesperson. The highest overall compensation recorded for an inside sales representative is $62,000.
So, since the pay is really varied, it’s interesting to look into what affects inside sales reps’ salaries.
First, let’s clearly define what an inside sales rep does.
What do inside sales reps do
Inside sales reps are salespeople who work inside the company office and don’t visit customers in the field. In the field of tech sales, where most transactions can be done over the phone and screen sharing functionality of calling software, inside sales reps do not need to be on-site with the customer and can close business over the phone or the computer.
This profession blossomed into the powerhouse job title it is today as tech flourished in the last two decades. Inside sales reps are the main driving force of a tech firm’s sales team. They work with business development representatives, marketing professionals and even outside sales reps in reaching revenue goals for their companies.
In more sophisticated and mature sales organizations, inside sales reps receive qualified leads that are sales-ready. Their task is to develop the relationship from lead to customer. In some organizations, the inside sales rep also carries the task of prospecting and qualifying leads.
Inside sales reps are mainly concerned with their individual sales pipeline and note the movement of prospects along the sales process. They must record each interaction, take note of what’s working and what’s not, and nurture their leads with content from marketing or sales enablement.
In some cases, a sales manager or a more senior inside sales rep is brought in to close a deal.
Depending on the company, an inside sales rep can either be a seasoned salesperson or even someone new to sales entirely. It all depends on the needs of the hiring company.
- Stellar communication skills
- Learning and information absorption
- Selling and negotiation skills
So, what affects the pay that inside sales reps get?
5 factors that affect inside sales representative salary
In this post, I will talk about what factors influence the base salary and total compensation inside sales reps get.
Inside sales salaries are dependent on firms but there are also notable differences in the pay scale depending on the size of the city and the region an inside sales rep is working in. For example, the average salary for an inside sales representative in the United States is $41,000 but the average in New York is $45,335 while in a smaller city like Cleveland, it is $38,724.
Why do wages vary in different geographical locations?
The main driver is cost of living. From minimum wages to hourly averages, the cost of living affects salaries. Rent, food, healthcare and transportation expenses vary widely depending on the city.
Major metros like Chicago, Seattle, New York and Dallas have high costs of living compared to smaller cities like Waco, Cleveland and Oklahoma city.
Let’s see. The average rent for a New York apartment is around $3000 a month, usually split between several people. New York also has income taxes, cutting down the $45,335 average salary to a much lower number. In a city like Waco, the average rent for a two-bedroom house is around $700.
While cost of living is a huge driver of salary ranges, it should also be noted that inside sales is a largely a tech firm profession, meaning it makes sense for cities with more developed tech scenes to have a higher salary for inside sales rep. San Francisco, arguably the most tech-savvy city, pay an average annual salary of $50,000, that’s a couple thousand more than New York, a tech city on its own.
More opportunities and better pay wait for inside sales reps in major cities–but the competition is also fierce. Companies sashay their competitive compensation packages to get the best inside sales reps in the market. However, with the startup scene continuously booming, there is also a movement toward non-tech professionals entering the tech scene through sales positions. Learning skills fast is priceless and getting the hang of tech processes, agile methodology and industry ideas is mostly better regarded than being a multi-decade sales veteran.
With the internet permeating the world of business, most industries employ inside sales representatives. From healthcare, marketing automation, enterprise software, information security, to agriculture training to education tech, there is a place for inside sales representatives in industries that have some sort of presence online and even only on display ads.
That said, the salaries of reps vary greatly even within industries. It all depends on the firm. However there are some trends we can pull insights from.
Companies that sell SaaS or software-as-a-service are sprouting up. With the subscription based model, they need to constantly onboard new customers to spur growth–especially because these companies are mostly tech startups.
How much does a SaaS inside sales rep position pay?
According to the Bridge Group, one of the leading firms in sales insights, the average base salary for SaaS inside sales reps in 2015 was $60,000. When inside sales reps hit target, the average they make is $121,000.
Account executives, quota-carrying representatives who don’t work for SaaS companies, make an average base salary of $53,000 a year. When on-target, they make around $94,000 on average.
Healthcare inside sales reps get the lowest average
According to data gathered by indeed, the average base salary of an inside sales rep in healthcare is $30,000 while the highest average base salary goes to education software inside sales reps who get $132,000.
Whether or not sales DNA is real is still in discussion. However, specialized skills are an absolute upside when it comes on getting better compensation as an inside sales representative.
Contrary to connotation, working in inside sales requires specialized skills. From using tools, familiarity with terminology and processes to sales techniques, skilled inside sales reps get more done, get more sales and are able to speed up the sales process. For this reason, skills impact salaries greatly in inside sales. The numbers gradually go up as increase in inside sales and skills are seen.
One way to look at it is that it impacts salary because skilled inside sales reps logically get more compensation because they are able to close more sales. Spiffs, commissions, and bonuses are breakfast, lunch, and dinner for skilled sales reps. They are able to present themselves as experts because it’s true. They are able to properly practice consultative selling.
Especially in the tech space, inside sales reps knowing their products inside and out requires that they understand the context of the industry where the tools are used.
According to Monster, strong negotiations chops are one of the most sought after skills in an inside sales representative. You may know selling, but unless you have the skills needed to close lucrative deals, then you’re lacking.
It’s not automatic that an inside sales rep with lots of years of experience gets better compensated than those with less experience. Recruiters and hiring managers dig deep into a salesperson’s experience.
Even when a recruit has only worked a year or two in sales, it’s crucial to look at the numbers. How did the perform? Did they hit quota? Were they challenging their limits over time?
Remember, recruiters look at LinkedIn profiles so that’s one area that inside sales reps need to work on when looking for work. HR will probably ask applicants or old employers how much a salesperson made in their last position.
But, like I mentioned in a previous point, companies are more willing to consider new entrants into sales. Numbers say that most people in sales shouldn’t be in sales–55 percent! A quarter of sales reps should be selling in a different industry. What does this mean? Many companies know that hiring experienced salespeople on a high salary doesn’t always drive ROI.
Generally, the base salaries are affected by experience only when the experience speaks. If the numbers are right, the pay will be better.
Okay. Sales compensation has so many schools of thought. There are sales leaders that don’t even believe in salaries. Pay-for-performance is not an unusual setup. It’s another notch higher than commision based sales where there is often no salary at all.
While this may sound like something that violates all labor codes, you need to know that most successful >$1M salespeople are under this compensation model. While OTE can be capped in some positions, p-f-p work is usually unlimited in commission.
In this vein, performance drives sales salaries the most than anything on this list. Degrees, credentials, years of experience do not mean salt in sales if you cannot close or cannot contribute to the sales organization.
The best gets rewarded
It’s true that the sales industry is known for high turnover rate–it’s something sales operations executives continually mull about. But what has to be seen here is that sales is mostly a merit-based space. The best stand out. If you do the work, you’ll get your bread.
Today’s sales organizations are highly data-driven. Data is used from operations up to determining a good salary plan and compensation structure for sales employees. There is no hard and fast rules when it comes to setting inside sales rep salaries but these are the factors that impact the process of coming up with a number greatly.
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