What is a draw in sales?

A draw in sales is a method of compensating sales representatives that involves paying them a base salary and then deducting this amount from their commission earnings. The draw is essentially an advance on the commission that the sales representative is expected to earn in the future.

Draws are commonly used in industries with long sales cycles or seasonal fluctuations, as they provide sales representatives with a consistent income even when sales are slow. However, if the sales representative does not generate enough commission to cover the draw amount, they may end up owing the company money.

Draws can help motivate sales representatives to meet their targets and are often used to attract and retain top sales talent. However, they can also create financial stress for sales representatives if they are unable to earn enough commission to cover the draw amount.

Companies typically have specific policies and guidelines in place for how draws are calculated, paid out, and reconciled. It is important for sales representatives to fully understand their draw agreement and the implications of failing to meet their sales goals.