What does "Zeroed Out" mean: definition, commissions, and draws
In sales jargon, zeroed out is when a salesperson earns enough commission to make their draw balance equal to zero. This means that they have paid out all their draws and can start earning commissions again.
To understand what being zeroed out is, we must first have some context and talk about how commissions and draws work.
Commissions and draws
What are commissions, how do they work? When a salesperson is given a percentage of a sale they make, that’s a commission. Sometimes sales go through highs and lows, just like revenue. During the lows, the rep is not making enough money through commissions, thus needing a draw from the company.
So, what is a draw? It’s an advance from the company paid back through the sales representative’s future commissions. It’s like a loan from your employer to be paid back.
Back to zeroed out again
Once the draws are all paid back, the sales rep can begin to earn again. This means the salesperson is making money again with no strings attached. It goes directly to them, and it’s no longer paying off the rep’s advance.