The benefits of outsourcing the sales function were examined earlier this year by Brian Shannon, president of EJB World Trade and co-founder of The Sales MBA. In an article that appeared on the website for Sales & Marketing Management magazine, Shannon maintained that outsourcing different parts of your business is not a new concept. In fact, most of you probably have heard of it or are doing it already. But what about outsourcing the sales function of your business?

How does an outsourced sales partner work? In most cases, when you partner with a company to provide outsourced sales (also known as a contract sales force), the company you’re teaming up with will generally be working on a commission basis. You simply pay them a commission when they deliver a signed order or agreement.

In other instances, contract sales forces will be paid a retainer by the partner firm — usually on a monthly basis — to act as their feet-on-the-street partner. A commission would likely still be paid if they close a deal, but at a percentage that is less than if this was a 100% commission arrangement.

One other case might be for you to retain the salespeople on your payroll, but hire an outsourced firm to manage your people and help your team members close deals. Again, this arrangement would likely have some kind of retainer-plus-commission formula to it.

Regardless of which model you choose, you can use an outsourced sales force as your exclusive sales team, or you can use it to complement your existing staff. Most good outsourced sales companies do their best to act as an extension of your team. They are trained by you and will attend meetings with your group. This provides the greatest level of consistency to your team and transparency to your buyers.

Reasons to Outsource

Why would you consider outsourcing your sales function in the first place?

• First of all, sales may not be a core competency for your company. There are lots of companies that have great leadership and products/services, yet have no idea how to translate that into revenue. These companies have no dedicated sales resources on staff and it is usually the founder who ends up selling (in addition to doing many other functions). The problem with that logic is that sales is a practice that is learned, applied and truly successful only with training and hands-on sales experience.
• Second, your existing sales force may not be meeting expectations. Why not team up with a contract sales force in several new markets to see how they perform relative to your seasoned veterans? At a minimum, this will generate some competitive spirit.
• Third, it may provide a quicker way to market for your emerging business. If you have no existing sales force, it will take you months to interview, hire, train and deploy a sales force. That lost time may be costly if you are trying to capitalize on a first-mover advantage in your market. Generally speaking, outsourced firms have sales resources on their bench or can bring people on board much quicker than you could. And they typically have more experience hiring the right candidates.

What does an outsourced sales agreement cost? The good news is, probably less than you think. The bad news is that most people do not realize how expensive it is to pay for good salespeople. For example, if you had a good salesperson, you are compensating them in any or all of the following ways: salary, commissions, benefits, travel, entertainment, car, cell phone, office supplies — the list can go on. When you add all of that up, it is a big number. And for most business owners, that number is bigger than they care to admit. So, an outsourced sales partner starts to make more sense once you break down your actual costs.

Here are some benefits to keep in mind with an outsourced sales group:

• First, if they are just on a commission basis, you only pay them when they perform. Granted their commission percentage is generally higher than your typical rate, but then again it should be, as they are assuming all of the up-front financial risk.
• Second, if you are building a business and cash flow is tight, having the flexibility to only pay for performance might be a very attractive option for you.
• Finally, contract sales agreements can be terminated. So, if something changes with your business and you want to move in a different direction, just put your sales partner on notice. You will need to work out the economics for your business, but it’s safe to say this could be a more cost-effective route for you.

Hiring a professional sales force should be treated no differently than choosing an attorney, accountant or doctor. These people are all masters at what they do. Whether you build your own team or hire one to assist you, the sales function is critical to the short- and long-term success of your business.

To learn more about Brian Shannon visit www.brianshannon.net.

Supporting Territorial Development Fees

“We’ve worked with shared territorial development fees with our reps, and we’ll do so again in the future. When we work on that basis we’ll agree on a monthly payment covering a period of 12-18 months that’s geared to give the rep some time to let him develop a level of comfort with our products. However, I’ve found that guaranteed income such as that isn’t the only effective means to motivate your sales force.” That’s the view of one manufacturer who is willing to negotiate such fees when it comes to pioneering work. He continues that what has really worked for him is a philosophy of support that complements such fees. “By that I mean sparing no effort when it comes to new product development, product samples, literature, training and communication. Added to that is from the beginning we let the rep know that we’re devoted to working by his side, not behind his back.”

Undoing a Wrong Move

Just months before he joined a major manufacturer as vice president of sales, the company replaced its extensive rep network with direct salespeople. “I don’t know if it was coincidental or not, but sales went in the tank, and I was brought in to turn things around. My first step was to reverse the action of my predecessor and bring back reps — many of whom had previously worked with the company.”

At the same time he brought back reps, he asked many of them what it had been like working with the company before he arrived. “Not surprisingly I was told that they were treated like second-class citizens. They weren’t welcomed into the company culture, had little inside support and very little communication on matters of importance. All the company did was set them out in the territory and expect sales success. That’s simply not the way things work.”

The vp reports that in the seven years since the ship has been righted, sales have gone through the roof. Perhaps most important, “Our reps recognize and appreciate the fact that we have an understanding for what they do for us and we have empathy for what they experience on a daily basis. Their continued top performance more than speaks to the point that we’re headed in the right direction.”

Principals Value Intellectual Property

As more manufacturers continue the move to downsize, many opt to work with reps for a number of reasons, not the least of which is that reps possess the sales, product and territorial knowledge to get the job done. According to one manufacturer, “Whether it’s through retirements or attrition, we’ve been losing a lot of our seasoned people. As expected, when they leave, they also take with them the years of experience and knowledge that they’ve accrued over the years. When we wisely partner with reps, especially those who have well-thought-out succession plans, we go to market with them with the expectation that they’re going to be with us for the long term. What recommends that we continue to work with these reps is the fact they have all the attributes we’re looking for in that they are self motivated, will stay in the territory (i.e., they’re not looking for promotions to the home office), and they are performance driven. It couldn’t be a better match.”

Knowledge Is Priceless

When manufacturers get together and talk about reps, the conversation eventually gets around to attributes of the ideal rep. Late this summer, one manufacturer weighed in on that subject with the following: “Early on in the relationship I can tell how things are going to work with a rep based on his willingness to learn all he can about us. To be effective, a rep must know all there is to know about the companies he represents. They’ve got to gain that knowledge so they can present the ideal solutions for problems that they encounter in the field. And, in order to gain that working knowledge of our operations, they’ve got to be vertically integrated with their principals and the markets that they serve. Our goal — and it should be a shared goal with our reps — is to be the quality and the solution provider for our mutual customers. The rep can only become the value-added provider when he knows all about our infrastructure, how we manufacture, and keep informed regarding any changes that are being implemented.”