Should You Outsource Your Sales?
For start-ups and established businesses alike, outsourcing their sales efforts are a common consideration. For startups, especially technology focused companies, the founder(s) is typically more versed in technology and may not be as proficient when it comes to sales and marketing. Whether an organization is looking to scale their business, save on costs, drive revenue, or supplement their current sales team, outsourcing sales is a viable option. The other option, of course, is to hire an inhouse sales team and handle all processes and procedures under one roof. In this article, we’ll look at the pros and cons of both options.
There’s no secret that the primary reason why a business would consider outsourcing their sales team is to save on costs. The cost of hiring your own sales team is not cheap. You must consider the cost of acquisition of a new employee, salary, commission rates, office space (or WFH expenses) new computers, phones and more. Based on our experience, to hire a senior account executive with at least 10 years of relevant experience, you are looking at close to a quarter of a million dollars when taking into account salary, variable and overhead. Based on the tight labor market even more junior reps are now commanding low 6 figure salaries. A company can expect to have a Cost of Sales (COS) of 35% - 40%. You can expect to pay your entry level sales employees somewhere in the range of $40,000-$60,000 per year, and that doesn’t include commission or other overhead costs. We have seen bases as high as $175,000+ for Senior Account Executives especially in certain specialty areas or for key verticals like healthcare, life sciences or financial services. The cost of hiring, ongoing training and managing these employees is another consideration. This is a prime example of “time is money.” Any manager would tell you that the majority of their time is spent managing those that they are in charge of. They spend endless hours recruiting, hiring, training, managing, and motivating their subordinates, and these hours come at the high price of the manager’s salary. Other costs that need to be considered, include but are not limited to; Prospect Lists Subscriptions, Social Media Tools such as LinkedIn and Sales Navigator, Intent Data Sources, Software Licenses for Microsoft or other solutions utilized. The main advantage of outsourcing your sales team is saving on the majority of, if not all of, the costs outlined above.
Depending on the model employed by the outsourced sales company, they may charge a monthly retainer or similar and or derive most if not all of their revenue from a higher commission structure than what is typically offered internally to “employees”. Because an employee will command a higher salary plus over head such as health insurance etc., your monthly out of pocket cost will be much greater.
One of the main reasons why organizations hire in-house teams as opposed to outsourcing is because they want control. They want to be able to control what types of people work for them, how they are managed and what processes and procedures they follow and most importantly to maintain the control of the relationship with the customer ultimately. In turn, lack of control is a clear con of outsourcing your sales team. There are some great companies out there that you can outsource your sales efforts to, and these companies are great because they place a premium on communication. They will schedule meetings at your convenience and proactively provide updates, but the reality is that managers and leaders may feel a disconnect if they don’t have an in-house team doing the work.
TIME and EFFORT
One of the many drawbacks of hiring your own sales team is the time and effort it takes to ramp them up to productivity. One recent study indicated an average of between 6 -10 months before a typical sales representative becomes fully productive. Additionally, management teams, some of your most trusted and talented people, need to steal work hours from other valuable projects and tasks so that they can recruit, hire, train, and manage these employees. The opportunity cost of this is everything else, including driving revenue and growth of the business, that could have been achieved with those resources.
EXPERIENCE & CHURN
Experience is also another key consideration. Depending on the level of sales executive that you are looking to hire, if you are hiring more entry level employees, they could require a lot of time and attention. As most entry level sales jobs serve as a launch pad into other positions, meaning that there will be a higher level of churn. With the higher churn rate, you will have to recruit, hire, and train again every 15 months or so. With outsourced teams, the level of experience that the Sales Account Executive brings to the table may be higher and can allow start ups and SMBs to afford a more senior level executive than what they might be able to afford if they were to bring them on as a full time employee.
TIME and ATTENTION
Another reality of outsourcing your sales is that these companies don’t just work for you. Obviously, their whole business model is centered around conducting sales efforts for multiple clients, which are just as concerned with growth as any other business. This means that the sales reps that you are working with are likely managing multiple different sales funnels for multiple different businesses at one time. Your business will not occupy 100% of the working brain space of these reps as it would for an in-house employee who is solely dedicated to selling your product or service.
As with many things in life, the answer to whether or not you should outsource your sales efforts is it depends. It depends on the type of business that you are running and the goals of said business. If you place a priority on company culture and having ultimate control and autonomy over your business, then hiring an in-house team may make more sense for you. If you want to be as efficient as possible with your time and money, and you don’t mind giving up some control of your business, then outsourcing sales could be the right move.