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 sales people 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 compliment your existing staff. Most good outsourced sales companies do their best to act as an extension of your team. This means having business cards with your logo on it, e-mail addresses from your company and voice mail extensions from your office. They even 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.
Secondly, 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. Secondly, 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, many contract sales agreements can be terminated with relatively short notice. 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.
