Building and maintaining a sales team can be expensive. Ideally, hiring sales professionals causes an increase in revenue, but the likelihood of challenges from the cost of hiring and sales turnover severely limits a return on investment. Conducting a cost analysis of hiring a sales professional versus outsourcing sales minimizes the pain associated with hiring and retaining sales professionals and maximizes profit.
There are many positions and factors to consider when building a functional internal sales team. Understanding the components and their costs can ensure the success or failure of your team.
Most companies start with account executives (AEs). The AE’s goal is to accomplish everything in the sales process – prospecting, closing, and retention. While it is common practice for companies to hire only account executives, this is a flaw in sales operations. Although it seems more cost-effective, it is costly and severely limits revenue potential.
#1: Provide tools and feedback for motivation and improvement. While sales professionals tend to be self-motivated, they still desire ongoing support.
#2: Remove the low-cost and high-time work from the account executives, like lead generation, setting appointments, and customer retention. High-performance internal sales teams hire individuals to accomplish these duties.
To oversee and improve a sales team’s performance, an internal sales team needs to hire a sales manager. Sales managers offer sales professionals someone to report to and coach them, listen to their issues, and analyze strengths and weaknesses. Beyond the value of sales growth, hiring a sales manager protects a company’s leadership from draining its time and energy on it.
To eliminate busy work from account executives, sales departments will hire sales development representatives. Their role is to prospect and set appointments to allow AEs to focus on closing deals. Some companies see this as an unnecessary luxury. However, the more an account executives closes deals, the more valuable they are. Wasting an AE’s time and energy on anything else hurts the business and the sales professional’s ability to produce.
Without support, an account executive sets five meetings and closes one deal weekly with an average deal size of $5,000. This account executive brings in $21,667 a month. With sales development representatives focused solely on setting meetings, the account executive’s weekly meetings increase to 10 per week. With the same closing percentage and deal size, the account executive now accounts for $43,333 per month.The cost of a sales development representatives to increase the deal flow is much less than the expense of having an account executive focus any time on it.
The average salaries for an account executive, sales manager, and sales development representative are $65,000, $75,000, and $55,000, respectively. With an internal sales team of five account executives, a sales manager, and two sales development representatives, the salaries will be $510,000 per year. The cost per employee is more than the salary, which includes benefits, commissions, training, recruiting, and more. Typically, these direct costs are two times the salary meaning a team salary totaling $510,000 will cost $1,200,000.
Unfortunately, beyond these expenses, multiple challenges exist in building and maintaining a sales team that affect each of these positions and inflate the costs.
#1: Determine your individual goals for the sales team and prioritize their value. Which one is more important – an increase in revenue and profit, a decrease in expenses, growing the employee count, maximizing production and time, etc.
#2: Layout how an internal sales team, or outsourcing sales will meet your priorities.
#3: Run a cost analysis of each solution with an Outsourced Sales Team Calculator.
#4: Seek guidance to navigate the internal hiring process or the right outsourcing sales team
#5: Be willing to change course. Sales is an evolving process. What is the best today might not be the right solution tomorrow. Some companies use one option, while others find a hybrid of hiring internally and outsourcing sales beneficial.
Finding, developing, and losing sales talent costs a lot of money, time, and stress. Beyond the cost of an employee, three prevalent and expensive problems occur with this process:
Great sales talent can be hard to find, which is why many companies make bad hires. According to Zippia, 75% of employers say they have made a bad hiring decision. The cost of a bad hire leads to companies losing $62 billion in the loss of customers due to bad service, $450-550 billion in lost productivity, and $500 billion due to workplace stress because of these issues. While these expenses do not show up on the balance sheet, they cripple companies and their ability to reach their revenue potential.
The average sales team loses 34% of its sales team yearly. The direct costs for each replacement include 21% of the proposed salary to fill one position and the portion of the sales manager’s time to fill the position, which averages 42 days and is money not offset by revenue from revenue. The cost of turnover does not only impact salary expenses, but also significantly affects team performance and sales. There are fewer team members available to accomplish the goals. The constant fluctuation causes issues with team dynamic, which adversely impacts production. The ongoing need to hire replacements focuses time on hiring rather than improving effectiveness to increase sales. To see how sales turnover affects a team, use the following Sales Turnover Calculator.
Losing quality talent is a major concern and expense within companies. Top, even average, sales talent, is valuable. Sales teams are the most important revenue source and should be the best compensated. Yet, many companies stifle top sales professionals by restructuring commission structures and making it harder for the best salespeople to earn more. Counterintuitive to an increase in revenue, this pushes sales professionals, realizing their value on the open market, to look for new opportunities. Additionally, businesses are more than happy to pilfer quality sales professionals with more money, benefits, and stability. Companies must decide if the value of top performers outweighs the cost of keeping them.
With an internal sales team, leadership has more influence on quality control. When your employees work for you directly, you can ensure that they adhere to your processes and practices. With an internal pipeline, there are more people to adopt your company culture. In addition, the internal pipeline is the natural stockpile of talent to learn about and hire for more senior positions. Unfortunately, it can be costly building an effective internal sales team. Beyond the development of the sales department, constant turnover and recruitment are expensive, time-consuming, and deplete team morale. With no shortcuts to this process, this additional stress might not be worth the advantages.
Outsourcing sales is a much more affordable option. Outsourcing sales eliminates the turnover and recruitment stresses, which allows team members to focus on higher-level processes. With the right outsourced partner, you will have leadership focused solely on the company goal, rather than worrying about team dynamics. However, finding the right outsourced partner can be a challenge. Inflated expectations and unfilled promises have left companies disappointed in outsourced options.
No matter your choice – hiring in sales or outsourcing sales – will be a difficult and essential decision for your ever-growing business.
Are you looking to hire recent graduates out of college? Want to know more about Gen Z students’ concerns and desires as they enter the workforce? Read our full 2022 job expectations report.