29th January, 2018
You hire a salesperson when you need more sales, right? Well, it’s a touch more complicated than that.
Many business owners agonise over hiring a dedicated salesperson, not knowing whether it will be worth it.
Lots of thinking, both financial and strategic, needs to happen to avoid a situation where a good salesperson is being wasted.
So how do you know when you need a salesperson?
There are, broadly speaking, two types of sales:
• A B2B sale is where one business sells its product or service to another business. Usually, the contracts are of higher value (+$1000) and there’s more involvement in closing the sale
• A B2C sale is where a business sells directly to an individual customer. Sales are typically valued under $1000 and are largely straightforward once the customer is convinced to buy
Ben Paul, sales advisor and contributor to The Pulse said businesses got the best value out of a salesperson when they focused on the former.
“I think there is a role in that B2C (business to consumer) space, but where a dedicated salesperson shines is in building relationships with key buyers, which is really about the B2B space,” he said.
A sale where the contract is large and needs sign-off from various stakeholders requires more support and relationship-building than a simpler B2C sale.
Investment Associate at Airtree Ventures, Elicia McDonald, wrote recently that a lot of software-as-a-service (SaaS) startups in the B2B space were, puzzlingly, ignoring the need for a dedicated salesperson in an effort to curb overheads.
But as soon as the annual contract value (ACV) of a potential sale goes above $1000, the number of ‘self-service’ sales start to drop off dramatically – replaced by ‘field sales’.
“Once you start to get into those complex, more expensive sales, that’s where having a dedicated salesperson starts to come into its own,” Paul said.
Doing a bit of number-crunching will help you figure out whether you need a salesperson.
One of the most vital things a company can do is to work out the Customer Lifetime Value (CLV) of any given sale, and your Customer Acquisition Cost (CAC).
Then you can start plugging away at how many sales a potential new hire would need to make on an ongoing basis to make their salary worth it.
If you’re a new venture, some of this will be guesswork combined with a lot of reading and talking to people in the market.
Also work out the margin associated with any sale to see what commission on each sale would be feasible.
Paul said that while there was still room for commission in sales (especially for newer companies), the days of the commission-only salesperson was coming to an end.
“There’s a lot more thought out of the US indicating that solely commission-based roles are going,” he said.
“In its place you’re getting higher bases. There are still KPIs to hit, but less on commission.”
Paul said the key to higher-value and ongoing sales was relationship-building – and that’s not always easy to fit into quarterly KPIs because it’s a longer-term game.
“How you set up your commission structure can set up behaviour. If you go for the short term, it can lead to the opposite behaviour you’d ideally want,” said Paul.
Paul said if businesses didn’t get salespeople to become “part of the business”, then they risked having the salesperson become a middle-man between the customer and the company.
“Invite them [salespeople] in and make sure the stakeholders in your business are on board with having the salesperson there,” he said.
He said the person having a deep understanding of the business and a willingness to share contacts with the business (and the business share contacts with them) was vital to a collaborative working environment.
“I would go as far as to say consider having the salesperson do another job within the business for a few weeks before they start selling,” said Paul.
“Having an understanding of the business and the environment it operates in is so vital.
“If they can demonstrate knowledge of the industry you’re in, that’s a sign they can have conversations with key people and customers about what’s happening with their business.
“Then the sale becomes about solving a problem for the customer.”
Paul said the best place to find great salespeople was on LinkedIn – and said employers should be looking to see how active potential hires were.
“Salespeople should be on LinkedIn and should have a good profile, including writing their own blogs and being active with sharing content,” he said.
“You can see that they’re in the field that your company or service is in, and they’re joining conversations or sharing third-party articles about issues in that industry.
“It means that they’re interested in your field, and they understand the basics of social selling.”