In my January editorial, I quoted a manufacturer who regretted a hiring mistake that put $200,000 of his company’s money down the drain:
“My problem is not that I have been searching for direct salespeople and didn’t find qualified candidates. My problem is that after a long search that didn’t turn up qualified candidates, a year ago I got impatient and decided to settle on the least problematic of the candidates who did apply.”
“Between salary, expenses, and medical insurance, I have spent $200,000 on the salesperson I hired a year ago, and I have absolutely nothing to show for it. $200,000 down the drain. That’s why I am calling you today to talk about reps.”*
The manufacturer and I spoke about the benefits of using reps, but only later did I realize what may be the most important reason to use $200,000 to hire 8-10 rep firms instead of one direct salesperson. Not putting all your eggs in one basket.
Spend $200,000 on one direct salesperson, and if that salesperson fails, “$200,000 down the drain.” Spend $200,000 on hiring 8-10 rep firms, and even if one or two turn out not to be a good fit, most of the reps will succeed, and you will still get a good return on your $200,000 investment.
It’s the same reason that savvy investors like Warren Buffet recommend buying shares in an S&P 500 fund instead of gambling on just one single stock: Diversification. A single stock may tank, but a diversified investment isn’t as risky, so your winners will probably outnumber your losers.
That’s another reason manufacturers should spread their sales investment over a nationwide rep network instead of hiring a single direct salesperson.
Because it’s too risky to put all your eggs in one basket.
* The manufacturer’s comments have been edited for space and clarity.