Building and maintaining a sales team can be expensive. While ideally hiring a sales professional increases revenue, the likelihood is that challenges stemming from the cost of hiring and sales turnover severely limit a return on investment. Conducting a cost analysis of hiring a sales professional versus an outsourced sales team can minimize the pains associated with hiring and retaining sales professionals, as well as maximize profits.
How to Build an Internal Sales Team?
To build a functional internal sales team there are many positions and factors to consider. Understanding the components and their costs can ensure the success or failure of your team.
Most companies start with account executives, whose goal is to accomplish everything in the sales process – prospecting, closing, and retention. While it is a common practice for companies to hire only account executives, this is a major flaw in sales operations. Seemingly more cost-effective, it severely limits revenue potential and is costly.
To build a high-performance sales team, it is essential to do two things:
Provide tools and feedback for motivation and improvement. While sales professionals tend to be self-motivated, they still desire ongoing support.
Remove the low cost and high time work from the account executives. This includes lead generation, setting appointments, and customer retention to name a few.
High-performance 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 that can coach them, listen to their issues, analyze strengths and weaknesses, and offer ways for development. Beyond the value of sales growth, more than anything, 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 account executives to focus on closing deals. Some companies see this as an unnecessary luxury. However, the more account executives close deals, the more valuable they are. Wasting an account executive’s time and energy on anything else hurts the business and the sales professional’s ability to produce. Let’s take a look at the math of this.
Without support, an account executive sets 5 meetings a week and closes 1 deal per week with an average deal size of $5,000. This account executive brings in $21,667 a month.
With a sales development representative 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 a month.
The cost of a sales development representative 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 with five account executives, a sales manager, and two sales development representatives, the salaries alone will be $510,000 per year. The cost per employee is much more than the salary, which includes benefits, commissions, training, recruiting, and more. Typically, these direct costs are two times the salary meaning a team with salaries totaling $510,000 will cost $1,200,000. Unfortunately, beyond these expenses, multiple challenges exist in building and maintaining a sales team, which affect each of these positions and inflate the costs.
What Are the Challenges of Hiring in Sales?
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 – 1) cost of a bad hire 2) cost of turnover, and 3) cost of keeping talent
Cost of a bad hire: Great sales talent can be hard to find, which is why so 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.
Cost of Turnover: 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 managers’ 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 of teams causes team dynamic issues adversely impacting production. The ongoing need to hire replacements focuses management time on hiring rather than improving effectiveness to increase sales. To see how sales turnover affects a team, use the following Sales Turnover Calculator.
Cost of Keeping Talent: 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 decide to make it harder for the best salespeople to earn more. Counterintuitive to increasing revenue, this pushes sales professionals, realizing their value on the open market, to look for new opportunities. In addition, businesses are more than happy to pilfer quality sales professionals with more money, more benefits, and more stability. Companies must decide if the value of top performers outweighs the cost of keeping them.
Is Outsourcing Sales Companies Worthwhile?
The decision of establishing and maintaining a sales team is up to each individual company and leader. Each solution has its advantages and disadvantages. With an internal sales team, leadership has more influence on quality control. When you have your own employees working for you directly, you can ensure that they are adhering to your processes and practices. In addition, with an internal pipeline, there are more people to adopt your company culture, as well as a natural stockpile of talent to learn about and hire for more senior positions. At the same time, building an effective internal sales team is costly. Beyond the development of the sales department, the constant turnover and recruitment not only are expensive and time-consuming but also deplete a team’s morale. With no shortcuts to this process, this additional stress might not be worth the advantages.
Outsourcing sales companies is a much more affordable option. This Outsourced Sales Team Calculator showcases the cost savings. Outsourced sales teams eliminate the turnover and recruitment stresses. This allows team members to focus on higher-level processes and decision-making. With the right outsourced partner, you will have leadership focused solely on your company’s goals, rather than worrying about team dynamics. However, finding the right outsourced partner can be a challenge. There are many horror stories of inflated expectations and unfilled promises leaving companies disappointed in outsourced options. Follow this guide to find the right outsourced sales team.
Follow these steps to build a high-performance sales team:
Determine what your individual goals are for the sales team and prioritize their value. Which is more important – increasing revenue and profit, decreasing expenses, growing the employee count, maximizing production and time, etc.
Layout how each solution – an internal sales team and outsource sales team – will meet your priorities.
Run a cost analysis of each solution, which can be done with the Outsourced Sales Team Calculator.
Seek guidance to navigate the internal hiring process or the right outsourcing sales companies
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.
No matter your choice – hiring in sales or outsourcing sales companies- will be one of the most difficult and essential for your ever-growing business.