Online Extra: Dearth of a Salesman
It's a classic Catch-22: You want to expand and grow your customer base, but you need sales people to do it. And you can't hire sales people until you're pulling in revenues from a larger customer base.
So, what to do?
The most common solution is to hire an independent sales company, or rep firm. The rep firm will work on commission-only, but the reps won't work just for you -- they'll represent a bunch of different companies and sell whoever's product or service seems the best match for the customer.
But if rep firms won't work for your company -- or if you'd like a more dedicated sales staff or think your product bundles particularly well with another line -- there are two other options. Those companies with a good hunk of cash and a need to expand quickly can look to sales-staffing services. And if you're not well-financed, but willing to do a lot of business development work, you might take a look at joint-selling agreements.
Sales staffing services provide full-time sales people who sell only for your company. You pay the staffing service (also referred to as a sales outsourcer), and the staffing service recruits, trains, and pays the salespeople. You're free from the burdens imposed by a larger workforce.
A good sales-staffing service can find experienced people much faster than most small businesses could manage. Some will also act as sales consultants, helping you "read" your pipeline, forecast future sales, and come up with a sales plan. "If a client tells us they want to generate $8 million in new revenue by the end of 2001, we build a sales team to do that," says Mike Barrett, CEO of First Technology Sales Inc., a sales-staffing company in Portland, Ore.
It's not cheap. Barrett's company charges a $50,000 fee for a "sales acceleration plan" or road map. Individual sales people cost an additional $8,000-$18,000 a month, plus commission. Salience Corp., a sales-staffing service in Andover, Mass., is one of the largest sales-staffing services. The smallest contract it will consider includes 10 salespeople and a manager for a minimum of six months. You'll pay at least $500,000 for such an engagement. A sales-staffing service may be your best option if time is critical, or if your company is launching a new product line and your own sales people are swamped.
JOINING THE BATTLE.
Joint-selling arrangements with other companies have the benefit of few upfront costs. The drawback is that you'll have almost no control over the people selling your company's products or services. Jere Doyle, CEO of 29-employee e-mail advertising company Eversave, which is based in Woburn, Mass., didn't really care. Doyle lacked the time and money to build his own sales team. Now he has outfits as diverse as Verizon, yellow pages company Trans Western Publishing, and the St. Louis Post-Dispatch selling his online ads.
"We really had to show them that this was going to help grow their core business," says Doyle. "If they thought they were being used to grow just my business, it wouldn't work." He convinced his partners that Internet advertising would help them get in to see clients who might not be interested, at least at first, in yellow page or newspaper ads. He made sure his product was easy for the sales people to understand, and he offered 75% gross margins.
The result: Doyle says Eversave will do about $4 million in revenues this year and show a profit of about $500,000. "If we had to do this ourselves, the company would look totally different," he says. For starters, Doyle would have needed more venture capital to hire the salespeople, and he'd would have had to spend more time managing them. "We'd be a regional player with about one-quarter [our current] revenues," he says And, no doubt, many times the headaches.
By Kimberly Weisul in New York
Edited by Fred Strasser