Sales outsourcing - Is it appropriate for you?

Sales Outsourcing by David Regler

Before considering whether outsourcing part of all of your sales is appropriate for you, let's get a clear understanding of what Sales Outsourcing is.

My definition of sales outsourcing is: "Contracting another company to execute part of all our your sales process"

You can think of a typical sales process including:

• lead generation
• lead qualification
• preparation of bid & proposal
• sales negotiation and closing
• implementation and order fulfillment
• post sales support and customer retention

So, Sales Outsourcing could cover all or any of these tasks within the typical sales process. The reality is that businesses have been outsourcing their sales for as long as there have been retailers. Using other parties as a route to market is effectively outsourcing part of your sales process to someone else. Since the rise of call centres and tele-marketing agencies, companies have also been "outsourcing" lead generation and lead qualification to third-parties. And with in-bound call centres it is now common to outsource post sales support and customer retention too.

A channel partner, in some respects is an outsourced sales resource. They provide an indirect route to market and fulfil many, if not all, elements of the typical sales process. In recent years, there has developed what is known as a "sales outsourcing" model.

Similar to a channel partner, a sales outsourcing company will cover most of the sales process (typically up to and including sales negotiation and closing) but there is a crucial difference: a sales outsourcing company remains a direct channel to market, representing its client directly. For me, this is the key distinction.

So is Sales Outsourcing right for you? I get asked this every day by potential clients. Like most things, it's best to start with the outcome you want and then work back.

The first question to ask is "Is a direct sales channel the best fit for you?"

That's a very big question and one which I urge you to spend time thinking about. Read Lawrence G. Friedman's excellent book "Go to Market Strategy", it is the simplest and best book on the subject.

In essence, you need to consider a whole number of areas but I believe the top 4 are:

1. Does your potential customer want to work directly with your company or through a third-party? For example, do you have a product or service that requires a lot of support, consultancy or is highly configurable?
2. How accessible is your ideal customer? Are they easily identifiable, or are they best found through companies that are already serving them?
3. How much competition is there through indirect channels? Are people asking to sell your product or do you need someone to drive it hard to be noticed?
4. How much time do you have? It is estimated to take at least 18 months to develop a strong indirect channel to market. Would you be better concentrating on a few significant direct wins?

The reality is that you could choose a combination of direct or indirect channels. OK. We want a direct sales channel. Do we outsource it?

Let's leave aside whether you are outsourcing just some part of the sales process. Working with a company to generate leads for new business development is an example, and is the area that my company specialises in.

I firmly believe that you should never outsource all your sales. Sales is a cornerstone function of the business and having someone within your business responsible for sales is critical to the success of your business. Even an outsourced sales resource will need to report to someone and have support from your business.

A more appropriate question is: "Should you hire and manage your own sales team?"Contracting your direct sales team out to a Sales Outsourcing company brings benefits such as:

• No setup costs or recruitment fees
• Flexible contracts (no employment law to deal with)
• More performance focused contracts than direct employees
• Highly scalable
• You can focus your management time on other aspects of the business
• Shared risk payment models preserve your cash-flow during start-up and growth periods

Is there a downside? Sure, nothings ever all one-way is it? Here are the top three areas you should consider:

Capacity - you never get 100% full-time focused on your sales.

Flexibility and scalability come at the price of exclusivity. Most sales outsourcing companies have between 2 to 5 active non-competing clients at any one time. Make sure you get performance metrics built into the contract.

Commitment - a shared risk model is good but it needs to be balanced. If the client doesn't have "skin" in the game, in terms of retainer payments, then the sales outsourcing company could simply walk away if the going gets tough (and it will).

This is why freelance commission-only sales people always seem a good idea but rarely deliver. Consider your sales outsourcing partner as a co-venturer.

Fees should be high enough to maintain interest but low enough to motivate performance. Cost - a shared-risk model, if it works, will cost you more than if you employed your own people. The running costs will be lower but the rewards to the sales outsourcing company will be higher (particularly if some of reward is taken in equity). Of course, if you fail to get the sales you need, you have less exposure and an easier exit than employing your own team.

For companies needing growth without significant outside funding, sales outsourcing could still be the best route. It is particularly suited to entering new geographic regions, or non-aligned markets and its scalability allows companies to rapidly acquire market share without the associated costs of building an in-house team.

David Regler
Maine Associates Ltd
We Get You In To Win