In one chapter, Davis covers Independent Sales Representative Analysis.
"Sales management have three basic choices when building their sales force: 100% company-employed sales people, an independent sales force, or a combination of these two"
In essence, the formula compares the overall costs of an employed sales force with that of independent sales representatives and calculates the break-even point below which you outsource and above which you bring it in-house.
To me, this is too simplistic.
The chapter concludes that companies need to consider their situation and longer-term strategic goals. "Costs will influence their decision" says Davis but "other, harder-to-control factors" should be considered.
In my experience, sales outsourcing decisions are seldom made with a straight cost comparison. The most common factors influencing a company's decision to outsource sales include:
Internal capabilities - if the company does not have, or is unable to attract, the capabilities to build a strong sales force, outsourcing to a contracted company is a good option.
Time to market - recruiting a sales team from scratch takes time. An outsourced sales force can bring immediate "feet on the street".
Conserving capital - recruitment fees, infrastructure and tools (laptops, cars, etc) mean that building an in-house sales team is a significant capital investment. A sales outsourcing partner will typically work on fee plus commission structure which can get you in the game for a lot less that hiring your own team.
Fixed versus variable costs - for start-ups and early stage companies this is often the biggest attraction of outsourcing sales.
Of course, costs are an important factor, but strategic value usually plays a more significant part of the decision to outsource your sales force.
Labels: interim sales management, sales compensation, sales outsourcing
i run a lead generation business at www.buyingtime.co.uk - and in my experience clients are very aware nowadays of the risks involved in sales teams. Risk Management is now a major issue with companies who turnover £2m-£10m, and they don't always want to place their destiny in the hands of a sales director whom they have just hired. metrics are all good, but growing companies are nervous about the sales process...
EMEA Sales Development - Challenges
When companies introduce their products and services overseas, they have three entry options which pose challenges that often lead to failure:
Indirect Channel Partner Challenges include:
* Lack of local supervision to drive sales
* Very long sales cycles and inaccurate sales forecasting
Sales Generation Firms / Sales Agent Challenges include:
* Lack of presales ability and focus
* High management time and cost overhead
Entity Set Up - Direct Hire Challenges include:
* High up front costs
* Local compliance, severance costs, entity dissolutions
EMEA Setup of Operations - Challenges
Overseas expansion has a heavy task burden; from selecting entity structures and local accounting partners to the management time required to oversee operations.
There is also substantial liability and permanent establishment risk from local employment laws, tax compliance and VAT filing requirements.
EMEA Development and Delivery - Challenges
Finding all the skills for a project internally or externally and having them available at the right time and cost isnt easy. In addition, internal resources are often overburdened with non-strategic operational tasks.
Conclusion
It is important to understand the dynamics of the task and the resources available before embarking on one of the 3 options. In addition there is another option which is to ousource some or all of the function until the dynamics / resources change.
Alan McKendry
www.mckendry.com