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A Cheap Sales Force Is An Expensive Problem

From time to time I hear from entrepreneurs who want to grow their revenue without investing in a sales force. Some want to put no money at risk, but they want the results that only come from real investments. They want to be cheap for different reasons, but it’s often a resistance to paying before they get results or because they’ve been burned by salespeople that didn’t produce.

Regardless of the reason for not investing, a cheap sales force is really more expensive sales force. You may believe that commission-only salespeople, independent agents, or very low paid salespeople will help you grow your business and reach your goals, but they won’t.

Commission Only

Commission-only is a compensation structure that works in some industries, and mostly only where the sales cycle is short enough to allow the salesperson to be immediately compensated upon making the sale. It isn’t easily applied to long-sales cycle, complex sales where the salesperson might take months to build a pipeline and start winning big deals. Running down the commission-only road costs you time–time that you can’t ever recover.

Sometimes independent agents work. But if they represent you along with a lot of other products and services, you have very little control over how much of their effort is really made representing and selling on your behalf. More lost time and more lost opportunities.

Very Low Base, High Bonus

You may be tempted to try a very low base, very high commission strategy. But getting compensation plans right is more complicated than simply basing the base pay on how little you can get away with paying. If the compensation structure prevents you from acquiring the talent you need to compete and win, it’s an expensive sales force. You’ll spend time, effort, and money without producing the results you need.

Don’t believe that this means you should pay any price for the talent you need. Getting the talent you need requires a thoughtful, well planned, and well executed compensation structure. Your budget is a consideration, but there isn’t any way to build a professional sales force without making the necessary investment. The cheaper you are when it  comes to investing in a professional sales force, the worse your results will be–if you even produce any results at all.

Questions

What is the primary reason some people don’t want to invest in a professional sales force?

What are the real costs of an ineffective sales force?

How do you afford a sales force when you have real financial constraints?

How do you design a compensation structure that produces the real results you need? How much is that driven by real constraints and how much is imagined constraints or personal resistance to paying?


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Comments

comments

  • Dean Horn

    Great article. I believe there is as much if not more risk recruiting an employee to sell, same performance risks with the overheads. My business is based on commission only and we are evolving Our strategies too. We work closely with our entrepreneurial clients to add mentoring, coaching and problem solving services as well as delivering commission only sales. We may also have ready made relationships with buyers in our sector that can rapidly accelerate the sales cycle!

  • Kaptain Mirza

    Great piece of Advice

    Businessmen get salespeople cheaply – the profession of traditional sales has been around for ages and in heaps. Traditional selling produces the same revenues and the same amount, thus no more investment on the end.

    The costs are pretty high for an inefficient salesforce – first is Time, second is compromised public relations and the connected markets – your product is bound to be sold in Europe, your salesforce is pitching a party in Vietnam, that connects with ill-knowledge of sales.

    To tackle financial constraints – get involved in Sales. Set aside a good percentage of revenues for the sales teams. Pay them immediately to avoid the pain of paying in huge one payment which can broken into chunks and will seem ‘less’ painful psychologically.

    Just my 2 cents.

    • http://www.thesalesblog.com S. Anthony Iannarino

      Thanks for sharing, Kaptain!

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  • http://www.CommissionOnlySalesJobs.co.uk/ Ryan Mattock

    Hi Anthony, I have huge respect for you and read your blog on a daily basis but I have to disagree with this post on a few points.

    Firstly I would say that a commission only sales team can work but it’s about making sure you choose only to work with the right people. A sales agent that already works with a product with a short sales cycle may be looking to additionally represent a company with a product that takes longer to sell and has a greater commission once the deal closes.

    Secondly it’s about experience. If a self employed sales agent has had 20 years of experience in their industry, they more than likely already have many contacts and are looking for companies to represent who’s products can be easily sold to their database.

    There are a huge number of professional self employed sales agents in the world, it’s just a matter of taking on the right people for your business just in the same way you would only take on the right kind of employee.

    • http://www.thesalesblog.com S. Anthony Iannarino

      I don’t disagree with you, Ryan. It’s all about intentions. If your intentions is a cheap sales force, then commission-only isn’t the answer. Neither is a channel strategy (which also requires a greater investment than most believe).

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