Small Business Management Series
Seven Ways to Drive Sales
Marc Kramer
11/09/07 - 11:49 AM EST
Every company since the beginning of time has focused primarily on three things: developing products and services, increasing sales and decreasing costs. The goals are fatter margins
and continued growth.
The one area that companies constantly tinker with is driving sales. The following is a breakdown of the seven main ways to run and drive sales, as well as the positive and negative aspects of each approach:
Captured sales force. These are sales people who only work for one company and sell only that company's products and services.
- Positive: These sales people give undivided attention to the company.
- Negative: There is significant cost to find, train, retain and support full-time sales people.
Distributors. These are companies that sell your product and/or service for either a split of the profits or will mark up the sales price of the product/service.
- Positive: The cost of sales drops dramatically because you don't have the cost of supporting a sales force. Distributors are like entrepreneurs so they are passionate about what they sell.
- Negative: You have no control over a distributor's day-to-day marketing or sales tactics.
Franchising. This is a sales process in which individuals operate under the same name of the company, follow the company's manual of operations, buy products and services from the founding company and pay a percentage of the sales back to the franchisor.
- Positive: Like distributors, the franchisees are entrepreneurial. You have control over the quality of the product and the marketing. Plus, there's no cost for infrastructure, equipment or real estate.
- Negative: You have no control over how the franchisee keeps the look and feel of the interior of the business. Also, you as the franchisor only get a small amount of the revenue .
Part-Time. These are people who are part of the company, but only work part-time and probably don't qualify for benefits.
- Positive: They are dedicated to your business and incur a much lower cost to support. You have the same control over part-time people as you do full-time employees.
- Negative: Although part-time people are dedicated to one company, because they are part-time they may not be able to give the effort needed to drive significant sales. They could also leave for a better deal.
Independent sales representatives. These are sales people who typically work for straight commission and they probably work for more than one master. They are most likely individuals who work out of home-based offices.
- Positive: They typically work on commission, so they are incentivized to sell as much as they can or they make nothing. They are self-motivated and usually have great business contacts, which expedites sales.
- Negative: They probably work for more than one company in order to spread their risk.
Strategic partners. These are companies who sell noncompeting products to the same market. They believe selling your product will produce another source of revenue and it's a way to diversify their own sales portfolio.
- Positive: They have contacts and acceptance in the space you are trying to sell in. The partner is excited to produce another line of revenue.
- Negative: A lot of time has to be spent training the sales force. You have to stay on top of the sales manager and sales force to get them to produce. Unless the sales people working for the partner have a great incentive to sell your product/service, the partnership will produce little or nothing.
It is rare for companies to try to use all seven resources to build sales. Most companies simply don't have the management bandwidth to do all seven. Plus, using more than two can lead to confusion in the marketplace in terms of who represents the company, and the overlap can cause fighting between sales teams over who "owns" the customer.
10 Things to Consider
Before you decide which sales process you are going to select there are 10 criteria you want to consider.
1. Capital investment. The cost of hiring one sales person includes a base salary, benefits, travel expenses, computers and other various items. Although this number, according to Salary.com, can range depending on the region of the country and industry, on average one sales person can cost you $50,000 per year.
2. Control. For a lot of business leaders it is important to control sales and using nonsalaried employees requires giving up some control.
3. Growth goals. If you want to grow quickly, then hiring one sales person at a time probably won't do it. (See criterion #1.)
4. Internal sales skills. If a business owner or a partner has good sales skills, then that might help you decide whether to keep sales in-house or to outsource the function. Having a partner with sales skills will save the company from initially hiring a sales rep. Partners also provide a passion and knowledge that hired guns never possess.
5. Product. Some products are so complex that they need to be sold by people trained in-house. Others such as basic retail products like office chairs can be sold over the Internet. By selling over the Internet, there might not be any sales people or just someone to answer the telephone.
6. Profit margins. If the profit margin is less than 10%, then paying a commission to outsiders maybe cost-prohibitive.
7. Local or regional reach of product/service. Companies that only focus their efforts locally might use one full- or part-time person. One sales person can visit three people a day and attend regional networking events, which would allow for significant geographic coverage.
8. National reach of product/service. If the company wants to go national then it has to think about having people in different geographic locations, especially if the sale process requires meeting people face-to-face. If you are selling products over the Internet that may not be necessary.
9. International reach of product/service. Companies that want to sell internationally need to think about properly communicating their product and/or value proposition in a way that is viewed positively by the culture in the market they are entering.
10. Type of product/service. The type of product/service will help drive what the best ways to sell are. My wife and I had an online business -- ExpertSpeakers.org -- that marketed business experts as speakers to trade associations and corporations. We were national, but never left our home to sell the product to either the speakers, who paid to be members of ExpertSpeakers.org, or the organizations that requested the speakers.
Once you have reviewed the 10 criteria for making your decision, you have to look at the strengths and weaknesses of each sales initiative and see which one meets your needs -- both short- and long-term.
