I get approached by a lot on online business looking to outsource their ad sales.

Well, I say outsource their ad sales but, basically, they don't have any to outsource.

What they all really mean is... "I want you to sell advertising for my unproven Web 2.0 business but I haven't any cash to pay you".

There's a great article in today's Sunday Times The new dotcom boom which gives some insight into this.

Whilst drawing some parallels with the last dot-bomb bubble, most notably the growth of start-up networking events, it's recognised that there are a some differences this time round.

Today, it's typcial of Web 2.0 start-ups see their exit through a strategic buyer rather than an IPO. VC activity is up but no-where near the feeding frenzy heights of last time around. One reason could be that it's so much cheaper to actually start up a Web 2.0 business today.

"Lastminute used to cost millions of pounds every year in technology," says Hoberman [Brent Hoberman of Lastminute.com and wayn.com]. "Now it is far cheaper." How come? "Moore's Law. Everything becomes cheaper and faster." Can you set up for 20,000? "Absolutely," says Clegg [Judith Clegg of the Glasshouse, the company that runs Second Chance Tuesday]. "Less, perhaps."

Add this to the fact that most Web 2.0 start-ups' business model is based solely on advertising revenues and you start to see why we get approached by so many people to sell advertising on commission.

The problem is that none of these start-ups have anywhere near enough traction to make a CPM model pay. So, to fill the void, there's this vague idea that someone can just make a few phone calls and drum up a quick ad deal for their "next big thing".

Sure, ad spend is moving rapidly online. However, as the article points out "with lots of social networking sites all seeking advertising money, some kind of shake-out is due."

Web 2.0 businesses typically work on some low value/high volume model (which could be be that a directly listing fee, monthly or annually subscription or CPM ad revenues). The trouble for us is that these models just don't work well with telesales (which needs at the very least a medium value proposition) unless you're prepared to buy business in a land-grab.

If you're looking to self-fund and grow covering your sales costs (outsources or in-house) from revenue then you either need a higher value offering or a small number of partnership deals which will bring the long term revenue scale you need.

So, now you know, please... stop calling me ;-)

Labels: new business development, sales outsourcing, start-ups, telemarketing agency, telesales, venture capital

Can you remember that line from Joe in Reservoir Dogs - "Let's go to work"

What a great film!

There's this theme that runs through some of my favourite films. Films like Ronin, Heat and, of course, Reservoir Dogs.

In all these films there's this core team of experts who come together to execute a plan.

That's something I completely identify with because it's at the heart of what we do; we pull together a team of seasoned experts, usually formed around a core team who we have worked with previously, to make it happen.

Our clients use us because we just "get to work".

It's something I've always enjoyed about people who are real experts at what they do; the straight-forward way they effortlessly deliver.

Whether we're talking about a builder, plumber or sales person, you know when you're with someone who's an expert in their field. And we're not talking about "book smart" here, I'm referring to the seasoned, battle-scarred expert who's earned their stripes in the trenches.

"Workman like" is a good term for it. No fuss, someone who quickly knows what needs to be done and gets organised to do it. Simple.

In fact, one of my favourite client testimonials pretty much sums it up:

"David is easy to work with, he understands how to get results and he delivers."

Let's go to work...

Labels: new business development, sales outsourcing, telemarketing agency, telemarketing company, telemarketing services

A recent book I've been reading is "This Business Has Legs", sub-titled "How I Used Infomercial Marketing to Create the $100,000,000 Thighmaster Craze: An Entrepreneurial Adventure Story".

OK, I'll admit, I have pretty eclectic reading habits :-)

The book is a fascinating insight into the world of infomercials, written by Peter Bieler, the entrepreneur behind the Thighmaster Craze - well worth a read.

Anyway, Peter set out to create a "virtual corporation", outsourcing all aspects of his business from day one, including sales. As Peter writes:

"The nice thing about a virtual corporation is that you don't have to change. You don't have to transform yourself from a frontline manager to a guy that sits at the top of a huge pyramid of employees. The other advantage to a virtual structure is that you can grow rapidly... not only can you grow rapidly, you can shrink - painlessly - if need be"

Given that the infomercial world is driven by instant sales hits with a limited shelf-life, this certainly makes sense.

But, more than this, outsourcing the parts of your business that you don't do well (or don't enjoy!) makes perfect sense.

When we work with business owners they all have a common thread; they're passionate about their product or service, they are typically the creator type... but they all hate sales & marketing.

I'm not talking about meeting with potential customers; all our clients love that part! It's all the peices that run up to and after this single event.

Generating leads, building a pipeline of business, chasing and closing deals - it all takes times and unless you've worked in sales or business dveelopment for any length of time, the knock-backs and rejections that come with the territory can be punishing.

In way, in current Silicon Valley parlance, we "eat our own dog food" here.

We're a classic virtual corporation in every sense. We scale for each client gig with an associate base, bringing a team of telesales, field sales and business development professionals to deliver results. Over time the structure of the team changes to reflect the business stage of each client.

Plus, in a way, we have outsourced our content production. It's almost a reverse-outsourcing, if that term exists :-)

We are the sales engine, but without our clients "content" (ie: their products and services) then we cannot grow our business.

Which makes us an ideal partner for clients seeking to outsource their sales.

Labels: entrepreneurs, new business development, sales outsourcing, small businesses

An very useful book for any sales manager is John Davis' Magic Numbers for Sales Management: Key Measures to Evaluate Sales Success. This book covers how to measure over 50 aspects across the sales process, from sales planning through to sales performance and review.

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

In a recent article "MBA put dotcom man on the map", Sean Phelan, talks about starting his successful internet business, Multimap.

It was interesting to read that sales outsourcing was a part of his company's early success.

"...for a cash-strapped start-up, variable costs are okay and fixed costs are bad. So I outsourced the hosting of the servers to an internet service provider, I outsourced the advertising sales, I outsourced answering the phone to a call centre, and I outsourced the bookkeeping to my accountant."

Last year I blogged about this strategy for start-ups and early-stage companies, "Sales Outsourcing as a Bootstrapping Strategy".

By outsourcing, Phelan took his start-up to a point where he sold 25% to investors for a GBP 1.9m stake without hiring any people. "Up to that point I had no staff at all", says Phelan.

Multimap will have a turnover of GBP 13m this year.

Labels: entrepreneurs, sales outsourcing, start-ups

I was looking through the 2006 vendor listings from The Black Book Of Outsourcing by outsourcing gurus Doug Brown and Scott Wilson, and realised that all the vendors listed were US based.

In most other categories, vendors listed come from a world-wide pool ranging from top-tier, full-service, large organizations; second-tier, speciality best-of-breed vendors; and small, strategically located vendors.

However, in the Outsourced Sales & Business Development sub-list they are exclusively US based.

I was surprised to see some of the vendors included in the list as, to me, they are effectively provide marketing services rather than pure-play sales outsourcing vendors. And there are certainly a couple of UK-based companies that I would have expected in this list ahead of other US players.

I suspect that this simply illustrates that the sales outsourcing sector is still developing, rather than a reflection of selection criteria.

Having just ordered the latest "black book", it'll be interesting to see whether any UK players have made the cut for 2007.

Labels: sales outsourcing

Over a year ago I posted about "Sales Outsourcing as a Bootstrapping Strategy".

I mentioned that "most of our start-up and small business clients are bootstrapping their businesses and our services are a low-cost and low-risk option for them."

This certainly hasn't changed too much. For international companies entering the UK market, many are investor backed, but they are still looking to contract us to test the market and develop a beach-head rather than launch full scale operations in the UK.

In fact, even if a company has raised a significant round of funding for international expansion, it is still a sound strategy to utilise third parties (outsourced sales/channel partners, etc) rather build your own local office and team.

In the book "Other People's Money", Michael Lechter talks about the sources of Other People's Money (OPM), which is generally equity investment, bank loans, as well as factoring, leasing, etc and also the concept of OPR (Other People's Resources).

Included in sources of OPR are co-venture, strategic alliances, partnering, licensing (including franchises) and outsourcing.

Michael's simple definition of outsourcing is "purchasing a functional service from another business" and he explains that it is effectively a way to leverage Other People's Resources in a similar way to Other People's Money.

In the same way that you pay a premium (or interest) for immediate access to money in the form of a loan, outsourcing provides you immediate access to resources without the time and expense of developing the capability or performing the task in-house.

Today, many people think of "outsourcing" as moving jobs to a lower cost region (which is off-shoring, really).

In reality, outsourcing could cost you more, even if some of that cost is deferred in terms of commission, with sales outsourcing, for example.

In the case of entering the UK, rather than paying the (large) up-front costs of recruitment, offices, etc and the time it takes get everything in place you could contract an interim sales manager to put feet on the street within days.

Instead of "buying it"... you "rent it"

Labels: market entry, sales outsourcing, small businesses, venture capital

Back in July last year I wrote an article on Ecademy called "Is Sales Outsourcing Right For My Business?". The article was aimed at helping people understand sales outsourcing and whether it was a good fit for their business.

I recently had a discussion with a sales outsourcing partner about the different models used and what the benefits are of each one.

Sales outsourcing, in the sense of contracting an external sales team, is still a young business model.

Models used by sales outsourcing companies range from 100% revenue-share/commission (usually only adopted when the company has established relationships they believe they can exploit for a superior return) to a hybrid fixed fee plus commission.

In addition to this, many companies using the 100% revenue-share model are forming joint-ventures with their clients with an exit strategy established up-front; once they build the business to a specific level the client either buys out their share and brings the sales function back in-house or, if the client's business is sold, the joint-venture is included in the trade sale.

To me, this model encourages long-term commitment on both sides, which is always a problem when working purely on commission. Plus, from a sales outsourcing perspective, it provides a larger upside through building equity. This is the principal of shared risk models - a higher reward for greater risk.

An alternative, particularly suited to very early markets, is to work on a fee + commission to ensure some control of time committed, activity levels, etc and then to phase into a full commission or joint-venture model once traction is established. This has the added benefit of both parties getting to know each other prior to any venture.

The common thread in each model is a balance of risk and reward between client and sales outsourcing firm.

Factors such as maturity of products and markets place a large part in deciding the best model. If time-to-revenue is likely to be long, then some form of retainer will ensure commitment from the sales outsourcing firm.

Otherwise, and I have seen this happen, the client will get 6 months into the contract and find out that their sales partner has dropped them for a more attractive offer.

If that happens, the opportunity cost in delayed market entry will far out-weigh any savings on fees.

Shared risk means just that... shared risk.

Labels: sales, sales outsourcing

There was a time when telephone selling, or telesales, was considered an lower level of of sales, compared to the smart-suited executive in his top-of-the-range car. Of course, this opinion varies from sector to sector; just look at recruitment to see highly paid executives who spend all their time selling by phone.

Nowadays, other sectors are beginning to realise that the telephone, when accompanied by online tools, can be a far more effective method of selling. We're seeing telesales now being utilised as a compliment to the sales cycle, particularly in areas such as software which were once considered "high-touch" and too complex to be sold using the phone.

I think that there are three key drivers behind this:

Online Presentation & Demonstration Tools - such as GotToMeeting, and WebEx, now make it simple to handle early parts of the sales cycle remotely. With decision makers and their teams often geographically dispersed, handling initial presentations online not only saves money in travelling costs, but can also dramatically shorten sales cycles. Plus, it enables the telesales agent to collaborate with pre-sales technical support (which could be located elsewhere) to provide all the answers that client needs.

Fee-Based and Disruptive Business Models - hosted applications, "software-as-service", and other low-cost charging models have made the on-the-road sales person no longer viable or cost-effective. Utilising remote selling, usually in conjunction with e-commerce platforms or live-agent tools, is the way forward. You still need highly-skilled people, but now they can service more customers in less time than is possible with face-to-face selling. Need an example? Look no further than salesforce.com

Changing Customer Attitudes - can you remember when they said no one would buy groceries online? when it comes to enterprise sales, people have been a little slower to catch up. Partly, I suspect, because sales people have a vested interest in keeping their cars. However, decision makers have become time-starved and scheduling a 20-minute online presentation can be much more preferable to blocking out an hour in the day (plus they can fit the online meeting in while they're working from home...or even while they're on the train!). Can you remember when most of your clients didn't have email? Nowadays, most middle-managers can only be contacted via their Blackberry (see Email vs Cold Calling) You get the point, people are far more open to new ways of doing business, especially if it saves them time.

Telephone Sales, Telesales, Remote BizDev, call it what you will...it's a growing part of sales today, and a great way to shorten otherwise long and costly sales cycles.

Labels: sales outsourcing, telemarketing services, telesales

I remember reading Thomas Friedman's The World Is Flat and thinking, "Oh so that's what we do" ;-)

There seems to be so many different labels in this sector I thought it might be worth exploring a few to see which is the best to tag us with.

We fit into "Outsourcing" as companies use us to fulfil a business process which they would normally handle in-house: namely, business development, lead generation and appointment setting. There's nothing new here, people have been doing this for some time and outbound telemarketing was probably one of the first to be outsourced.

As a company that works on an associate model, most of our people would fit with the "Homeshoring" label, that is, they work from their own homes.

And on some projects needing qualification of a large number of companies (or a very detailed and lengthy qualification process), we offshore that process ourselves to our partners in India.

The reality is that, we mix and match these services to deliver exactly what's needed for each client. Sometimes a project will start with myself to profile the target market and refine the process. Once I've done that I may use associates to help scale up the project, or offshore the project to leverage a lower cost base.

This is what they call "Bestshoring", finding the most appropriate resource for each stage of the process. Or you could just call it common sense ;-)

Labels: sales outsourcing

"Pay Per Performance" is a concept that appeals to many interested in sales outsourcing. It makes sense, after all, to only pay when you get results, doesn't it?

Of course, in order to interest an individual or company to work on this basis, there needs to be a significant reward to compensate for the risk and costs you have removed from yourself (not entirely though, as we're not discussing opportunity costs here; we'll save that for another blog).

When you've got no revenue, and non-performance costs you nothing, then how much of the upside are you willing to share? 50%? 60%?

I know another business development company that, on a pay-per-performance basis, takes 75% of any profit made on the deal. Would you be OK with that?

Here's a story from Outsourcing the Sales Function which illustrates the potential problem.

In the 1990's, Jeffrey Katzenberg, a Disney executive, agreed to produce a movie on an entirely performance basis - 2% of the proceeds. At the time, Disney didn't hold high expectations for the project. To everyone's surprise, The Lion King, became a runaway hit and Disney made over a billion dollars in profit.

The performance pay that Disney owed Katzenberg was so large that Chairman Michael Eisner simply refused to pay him. Katzenberg took Disney to court, holding up his contract as exhibit A. Disney eventually settled.

So here's the rub with "pay per performance" - when things go really well, the large rewards can generate regret and envy, even though it was all agreed happily at the start.

In our experience, once sales start to come through, companies will quickly want to re-negotiate the level of performance pay. Of course, if there's a pipeline of business that's been generated and starting to flow, your sales outsourcing company will be reluctant to do this. After all, they've done the "hard work", now it's just a matter of closing the deals taking the lion's share of the revenue.

As always, having a clear exit and hand-over strategy is essential to avoiding potential problems in these type of arrangements.

Labels: sales compensation, sales outsourcing

I was reading an article recently in Outsource Magazine which was a pretty comprehensive view of the Sales Outsourcing space. Some key quotes from the article "Selling the Family Silver?" (issue 3) are:

"In direct sales, there are 3 main elements to engaging with a customer...and it is always the least relationship-driven aspects of these [lead generation, making appointments, telesales and telemarketing] that are the most likely candidates for outsourcing."

"New business creation is the least complex to outsource, and this is reflected in market demand."

"A number of UK companies have more than 40 to 45 per cent of their sales force outsourced because it brings in best practice and internal competition to the industry and it also frees up internal resources and people"

"Organisations that often choose to go down the outsourcing route are startups and small businesses because the move enables them to reduce their overheads, improve their cash-flow and access different skill sets as and when they need them."

I couldn't have written it better myself :-)

Labels: sales outsourcing

Just a quick heads-up on a great book covering Sales Outsourcing. It's called "Outsourcing the Sales Function - the real costs of field sales" by Erin Anderson and Bob Trinkle.

The book is packed with examples of where companies have successfully outsourced its sales function, as well as a CD with a spreadsheet that helps you calculate just how much your sales team is costing you - ouch!

But, best of all, I found the quote "Nothing happens til somebody sells something!"

That one's pure gold :-)

Labels: sales outsourcing

I read an article I found on google called Straight to the Outsource.

It covers most of the benefits of using sales outsourcing, such as cost, flexibility and freeing up management time.

One area I don't agree with in the article, is the idea that sales outsourcing is best for small ticket items rather than larger sales. I think that reflects the US sales outsourcing model with is more agency-based (where a sales outsourcing company sells your product alongside complimentary products from non-competing vendors). In that model, the sales team are already calling on your target market so for them it's a simple cross sell.

Our model is more about targeting your market and using our experience to win sales. The difference is that the agency-model is more like a reseller channel. They'll push your product if they can see how it fits with their existing clients.

If you can find partners like that, it's an effective route to market.

We sit in the space where you can't find those partners but you still need a sales effort. In that case, outsourcing your sales through our model has many benefits over hiring your own people, but it is best suited to larger value sales, or to "prime the pump" and win licensing deals that require little or no additional selling (we come in, win the deals and then you scale back to maintenance only)

I'm still working on my article on Sales Outsourcing. Looks like it will be a project to complete over the holidays.

Labels: sales outsourcing

I've been re-reading "Go To Market Strategy" by Lawrence G. Friedman and I'd forgotten what an excellent book it is.

It really is one of those "the title says it all" books and to my mind is essential for anyone launching a new product or service.

The section on "the ten commandments of going to market" is a classic. The book sets out the concept of "channels" really clearly and, re-reading it again, gave me additional thought on the value of sales outsourcing.

So much so, it's inspired me to write a report explaining how sales outsourcing can be used effectively as a go to market strategy for startups and growth businesses.

Watch this space.

Labels: sales outsourcing, strategy