Financial Planning for Sales Professionals

Sales Plan



Financial planning for sales professionals takes more creativity and flexibility than for individuals or families that receive a set income. Sales professionals have the added complexity and stress of managing both your sales goals and fluctuating personal financial situations. Finding time to deal with personal finances in the midst of prospecting, closing deals, managing territories, traveling and continuously working on your sales skills is no easy task! 

When I was in sales my personal financial plan was consistently placed on the back-burner. The constant grind of hitting quotas, traveling to meetings (or a continuous flow of zoom calls), following up efficiently and providing feedback to product development teams or management was exhausting.

The ongoing pressure of the sales cycle didn’t leave much energy or time to think about tax planning, cash flow management, investments and equity compensation planning. I had a rough estimate of how much I could spend and figured if I continued bringing in a steady flow of commissions then things would just work out. Please don’t take this approach. Past experience and insight into the minds of sales professional has helped me understand the type of relationship, processes and strategies that can lead to an optimized personal financial situation.

All of the successful sales people I know are confident. Without belief in yourself, your role, your value and your company you aren’t going to get very far. Successful sales people also tend to struggle with delegation as they’re used to managing their territory, relationships and sales cycle. This is understandable when your paycheck depends on you! These personality traits, while vital to a successful career in sales, can lead to missed opportunities or a suboptimal course of action when it comes to financial planning.

“Selling” today takes a much more collaborative approach. Successful sales professionals are experts that collaborate with their buyers and have a unique ability to uncover the true problems, opportunities and strengths of their clients, and align their product or service in a manner that helps them achieve their goals. A financial planner should take the same exact approach and provide the expertise and structure that a sales professional needs to feel confident outsourcing their personal financial planning. 

Initially, strategizing for sales professionals encompasses a few key questions, which will help you understand whether your financial plan is in a good place, or if some optimization is in order. 



If When you have a down year are you able to sustain your current lifestyle?


Cash flow planning presents some unique considerations for sales professionals. Whereas most other positions receive a stable paycheck on a bi-weekly basis, sales professionals primarily earn through closing deals and bringing in revenue for the company they work for. Regardless of the pristine processes, systems and activity levels you adhere to, a down quarter or year is inevitable. This can be due to economic cycles, industry wide issues or rising levels competition.

Does your cash flow plan account for a down year? Do you have a firm grasp on your expenses and how fluctuating income impacts your ability to sustain your lifestyle? 



Are you overspending in anticipation of any bonuses that may or may not materialize?


Sales cycles, like investment markets, are cyclical in nature. The danger for sales professionals comes in the form of overestimating how much they can spend on big ticket items when things are going well. As Warren Buffet has famously stated “only when the tide goes out do you discover who has been swimming naked.” Taking on large amounts of debt, or making big ticket purchases during extraordinary times can lead to adverse consequences down the line if and when things even out. Fixed debt limits the flexibility you have going forward. Have you given yourself enough flexibility to adapt in a worst case scenario?


How much are you currently saving? Should it be more?


What is your current savings rate? Savings come in the form of cash savings (emergency fund, short term goals) and investing for the future and retirement. The quick and dirty calculation for savings rate is to take your retirement contributions, emergency savings, goals savings and college savings divided by your gross income for the year.

A general rule of thumb is to have this ratio greater than 10%, but a unique approach given your situation is always necessary. Sales is a demanding career and can often be unsustainable until “normal” retirement age if you would like to balance time spent with family. This unique wealth accumulation window provides specialized planning considerations and often calls for substantially higher savings rates.

Once you have a firm grasp on your cash flow you can determine whether you are saving enough, and collaborate with your planner on a savings plan that adapts to your income for any specific year. 



Is your emergency fund in order?


Another oft cited financial planning rule of thumb is to have an emergency fund (in cash) that covers 3-6 months worth of expenses. The optimal balance comes down to things like your job security, your partner’s income and job security, the dependents who rely on you and your fixed vs. variable expenses. This rule of thumb may not be appropriate for sales professionals whose income may not be as stable and predictable. Your situation is unique in that you have an extraordinary ability to take risk, however your income may present you with a low need to take risk. Balancing this equation takes a firm understanding of your current financial situation, goals and willingness to take risk.



What is your current compensation structure? Can you afford your lifestyle if you aren’t hitting bonuses?


Forecasting… every salesperson’s favorite activity. You can take a similar approach to your personal financial situation. It starts with a firm understanding of your company’s compensation structure, and a detailed analysis and forecast that includes multiple scenarios and income levels. Can you afford your car payments if income drops 20%-30% in a given time period? Would it be a stretch to make your mortgage or car payments with a slight decrease in incentive compensation? Taking a conservative approach when calculating how much you can afford will help you stay on track if certain goals or bonuses aren’t met.



What is the plan for your extra cash?


You’ve had a terrific year. You crushed your quota, all of the additional goals and have made more than you ever imagined. Your product or service is loved and your company is taking off like a rocket ship. Congrats! What is your plan for the extra cash you’ve accumulated? What is your approach to unanticipated bonuses or income? Are you planning to switch careers in the future, and how might that impact your ability to save? Understanding your plans for the future can help ensure that a suitable savings plan is implemented when your ability to save is highest.



What are your financial goals and how are you prioritizing them?


This aspect isn’t unique to sales people, but is vital all the same. What are your goals? Is it a first time house purchase? Possibly an early retirement? What if the sales life has ground you down and you would like to make a career change? Prioritizing your goals and funding them appropriately will help you focus on what is most important and allow you to reach your desired goals in a more efficient manner. 



Have you protected the wealth you’ve already created before taking on additional risk?


A personal insurance review can provide peace of mind.  Knowing that your family and dependents are taken care of in the case of an adverse event can allow for greater flexibility in other areas of your plan.

Life insurance and disability insurance are large components of a personal insurance plan, especially for high earning sales professionals. Most companies offer life insurance through their employee benefits package. Typically it isn’t enough to replace the income for high earners. It’s also not portable in the event of job loss or retirement.

Disability insurance is frequently ignored by individuals. The reality is that the chances of disability are substantially higher than death. Most companies also offer both short and long term disability. Again, monthly benefit caps can leave massive gaps for high earning individuals. Understanding the differences between own occupation and any occupation disability insurance, and researching coverages available outside of your workplace can help you protect what you’ve worked so hard for. 



Sales professionals are excellent planners with strong initiative and emotional intelligence. A similar approach to financial planning can help your personal finances run as efficiently as your sales territory and career. I hope the questions provided in this article provide a solid basis and set you down the right path!


Disclaimer: The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. This content is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Hereford Financial disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

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