Build a Stellar Sales Team
If you want to build a strong business, you're eventually going to have to hand over the sales reins to a sales team. Here's how to do it right.
When you're starting out, you may be sales manager, marketing director and lone salesperson all in one--plus filling whatever other spots exist on the organizational chart. As you grow, however, you'll find you need additional people to handle specialized jobs. These will someday include a chief financial officer and vice president of operations, among others. But one of the first specializations in which you're likely to need to hire is sales. This makes sense because sales are what drive your company's growth. All other things being equal, the more salespeople you have, the more sales you will generate. So adding sales personnel and improving your existing sales staff are essential parts of growing your company.
Evaluating Your Sales Force
Maybe your sales force is fine the way it is. Maybe not. How can you tell? Evaluating your sales force is an important step in the process of deciding whether and how to grow your sales team. If your existing sales force is fine and will be more than adequate to fuel future growth, you still might need some additional training or perhaps a revamped compensation package. On the other hand, your sales force may need to grow by a few heads, or you may choose to stay the same size but have different people filling the sales positions.
Step one in evaluating your sales force is to decide what you want it to do for you. For some companies that do most of their selling through mail order or the Internet, a sales force is strictly an option. In this case, you may expect your sales force to handle only the larger accounts, leaving the smaller orders to customer service personnel and order-takers. For other companies, however, the salesperson is the most visible--and perhaps the only--outward manifestation of the company seen by customers. This type of salesperson carries a heavy load. He or she has to uphold the company's image, hold the customers' hands, interface with delivery and repair departments at headquarters, and, of course, get the sale.
It won't require a lot of thought for you to come up with a good description of what you want your sales force to do. Make sure you're not evaluating your sales force based on some other company's needs. For instance, if your salespeople are primarily charged with following up on leads generated by your advertising, don't penalize them if they aren't making a lot of cold calls. Once you decide what jobs your sales force is intended for, simply check their performance against the requirements. The key measure when it comes to evaluating a sales force is sales productivity.
Measuring Sales Productivity
The simplest measure of sales productivity is the dollar amount of sales per salesperson. That's easy enough to figure out: Just divide the volume of sales by the number of salespeople on staff. That will give you an average sales productivity figure and let you know how the average salesperson in your organization is doing. More useful, though, is to know how each individual salesperson is doing compared to the average. You may have a handful of relatively productive people who are carrying the load for a raft of underperformers. This is the kind of information you'll need to know to decide whether to make a change.
Be warned, though: Sales productivity may involve more than simply generating dollars of sales. Your sales force may be moving a lot of product now but costing you sales later by alienating customers with poor service. They may be making promises you cannot deliver on, overburdening your production and shipping departments. They may be selling a lot of the wrong products (items with low margins or high support costs) while ignoring your more profitable lines. Check to see if certain salespeople have large numbers of returns or tend to sell to customers who don't pass credit checks. These salespeople could be costing you more than they're worth.
Adding salespeople can result in steadily increasing sales. This can free you up to spend time and energy on other tasks. Hiring salespeople could also hurt sales, erode profits, damage valuable customer relationships, and destroy your image in the marketplace. The difference between these two scenarios is the difference between hiring the right salespeople and the wrong ones.
Salespeople aren't just the people responsible for building your bottom line. They're also your front-line troops, the ones with the most daily contact with your customers. With those caveats in mind, it's important to not only grow your sales force, but to grow it properly.
To start with, understand that there may not be any truly bad salespeople. There may just be good salespeople in the wrong positions. To hire the right salesperson for the job, you have to understand and be able to describe what the job is. That means clarifying whether this sales position is intended to immediately generate sales or perhaps develop contacts for a sales cycle that may stretch into months or years. Do you want someone who is a closer or one who takes more of a consultative approach? Matching your company's sales needs and selling style to your new hires is the first step in getting good salespeople.
Few salespeople are motivated by altruism, and misunderstanding your company's compensation package is one of the main reasons for sales staff dissatisfaction and turnover. For all potential new hires, explain precisely what the compensation plan is. In addition, clarify the territory, your performance expectations, any training you will offer, and any sales tools you will provide. You should also provide candidates with a thumbnail description of the market and the competition. Then you will know that you've explained the opportunity accurately to anyone who's interested.
Don't stop by describing your needs. Imagine the ideal salesperson for the job, including his or her personality, experience, energy level, reputation and abilities. You may not find someone exactly like that, but if you don't know what you want, the odds of making a bad hiring decision are high.
Only now should you actually start looking for salespeople. But before dashing out a three-line ad and calling the classified department of your local newspaper, consider some other options:
- Look internally. You may have technical, support, operations or administrative people who would and could successfully move into sales. Post the ad on a bulletin board and see what happens.
- Ask for employee referrals. Chances are your existing employees know the kind of people who would be happy working for you. They may be able to suggest some people for you to contact.
- Network with suppliers, customers, colleagues, advisors and social contacts. This can be cheaper, faster and more reliable than advertising to the general public.
- Check with professional associations. They may have job lines to help members find employees.
- Try online advertising. The speed, freshness and searchability of online job banks make them attractive options for both candidates and employers.
- Check with your local college. You may be able to hire a recent graduate who's enthusiastic, effective and less expensive than a seasoned professional.
- Contact headhunters. Headhunters specializing in sales personnel aren't cheap, but when labor markets are tight, it may be worth the cost to find a solid salesperson.
Consider using temporary and staffing services. Temporary and staffing services can provide you with sales and marketing personnel on a temporary, temp-to-perm, or permanent direct-hire basis.
Types of Salespeople
Manufacturer's representative, broker and agent are terms used to describe independent sales agents who work on commission. You don't pay them a salary, just a percentage of what they sell. Manufacturer's reps offer a practical, cost-effective alternative to a direct sales force for many growing companies. There are more than a half-million reps in North America, most selling to targeted markets in select geographic regions. Reps know their markets because they call on local buyers regularly and have established working relationships.
Using reps can provide you with many of the benefits of having a satellite office in the location--including knowledge of local markets and rapid access to large accounts--without your incurring large fixed costs. With reps, sales costs are always a fixed percentage of sales. The downside is that reps typically handle many different products. Some may be complementary to yours, while others may compete. A typical manufacturer's rep earns a 5 percent commission on sales, although that amount varies widely depending on the product, market and sales volume.
Telemarketers who contact your customers by phone can provide customer service, answer questions and follow up on previous shipments as well as take orders. One of telemarketers' most useful jobs is generating qualified leads. Because you contact customers using phone numbers, it's easy to track results from a telemarketing effort. You can build your own telemarketing operation in-house or contract with a third-party call center.
Of course, you need not decide to go with only one form of sales force. Many entrepreneurs effectively deploy a mix of inside and outside sales forces, sales reps and telemarketers. The challenge is managing conflicts, including turf wars and cannibalism.
It's never easy to hand over responsibility for an important management job to someone else, but delegating accounts to your sales manager may be the toughest thing you will ever have to do. After all, you've won over these customers. How can you be expected to happily shift the responsibility for servicing them to somebody else? But hiring a sales manager is an important part of your business's growth. It's unreasonable to expect to be able to make a dozen sales calls a day, direct other salespeople and run the company at the same time. Once you hire a sales manager, you'll be able to greatly reduce your sales calls and eliminate managing salespeople, and devote the balance of your time to the jobs you're uniquely qualified to handle, like devising the company's strategy.
A good sales manager has to be able to:
- Oversee salespeople
- Develop sales strategies and plans
- Set targets for the sales team
- Monitor sales performance
- Personally handle key customers
- Prepare sales reports and other reports
- Report directly to you or a superior in marketing
Typically, you'll want a sales manager with experience both selling and managing. Sales managers should be well-versed in the computer or other technical skills required to manage your department and demonstrate your products. He or she should have good leadership and communication skills and have a proven record of growing sales in past positions. If you have a specific problem you want your sales manager to address, such as difficulty reaching larger corporate customers, you will want someone with expertise in that area.
In-House or Outsource?
In these days of outsourcing everything, many companies continue to keep their sales forces in-house. There are plenty of opportunities for having outside salespeople hawk your product, but there are many advantages to keeping the sales function internal.
Inside salespeople work for you as employees so you can expect their full attention and dedication to calling on customers, answering queries and handling problems. Because they work for your company, they should know a good deal about opportunities for cross-selling additional products and services to existing customers when they are placing orders. Since they're on staff for the long haul, you can afford to train them to be knowledgeable and courteous when dealing with customers. Inside salespeople can be shaped the way you want them--to go after large sales or focus on after-sales service--as you and your strategy dictate.
Outside salespeople, such as manufacturer's reps, have one shining quality that distinguishes them from in-house people: They're cheaper. Because you don't have to pay a salary and benefits to third-party salespeople, you can afford more of them. This may allow you to reach more markets and customers than if you were relying solely on the salespeople you can afford to hire as permanent, full-time employees. The problem with outside salespeople is they may be selling similar and even competing products, so you could lose sales.
Dividing Up Territories
A sales territory is a segment of your market that you've assigned to a salesperson or a group of salespeople. While a sales territory is usually described as a geographic area--states west of the Rockies, for instance--it should be thought of as a group of customers and should be serviced with close attention to customer type. Some territories aren't geographical areas--customers over $1 million in annual sales, for example. These "territories" may be assigned to product or account specialists, such as those focusing on large accounts, rather than to the people who would otherwise own them because of their geographical territories.
Few things are as loaded as the assignment and division of sales territories. Salespeople tend to think all the good prospects are in others' territories, while all their best customers have been gerrymandered into someone else's territory. When dividing up territories, you want everyone to feel they got a fair shake, but at the same time, you have to be realistic. You want to match salespeople with territories based on things other than strict equity. For instance, if your salespeople vary widely in talent and energy level, you don't want to give everyone comparable sales territories. It makes sense to divide territories to make the most of everyone's abilities. If a salesperson is great at dealing with midsized accounts, save big prospects for someone who'll do well there. Therefore, the key to good sales territory design is appropriate balance.
As your business grows, so will your need for additional sales personnel. Remember: The more salespeople you have, the more sales you will generate. So don't make the mistake of thinking you can grow your business without growing your sales force--one way or another--right along with it.
Excerpted from Growing Your Business .