The Care and Feeding of Sales People
Many owners of small Web design firms reach a point where they want to hire a salesperson, or even create a sales force. The benefits seem clear enough:
- Increase sales by hiring professionals who are skilled to generate business.
- Leverage your time so that you can focus on other things while your business grows.
- Recruit someone to sell for you, because you don’t want to or aren’t good at selling.
Despite these theoretical benefits, many owners of Web design firms have had bad experiences recruiting, managing, and keeping good sales people. To quote some of my own colleagues:
"I’ve gone through three sales people in the past year, with no results. I’ve done nothing but waste money on these people, and don’t know what to do next…"
"I can’t tell if my salesperson is doing a good job, or if he is useless. He tells me lots of work is "just around the corner," but little business ever seems to close. I don’t even know how to talk to him or follow up to make sure he is doing what he is supposed to be doing."
"I hired the wrong salesperson. He likes networking at Chamber of Commerce events, but that’s something I do. He also likes to schmooze clients, which again is something that I do. Meanwhile, he hates cold calling as much as me, and hasn’t opened a new account yet…."
Why Salespeople Don’t Work Out
There are ten key reasons why most sales people don’t work out. The net effect of any of these reasons is poor results: sub-optimal sales growth, a continuous cycle of churning salespeople at your expense, and frustration on your part. Let’s discuss these reasons, then discuss the right way to recruit, develop, and retain top salespeople.
Abdication means that you fail to take any responsibility for the success of your sales pipeline, and dump everything into your salesperson’s lap. In other words, you shift the responsibility and the blame for poor results to anyone but yourself. Abdication happens frequently, especially with technically-oriented business owners who don’t want to be involved with selling. When you abdicate, you provide no leadership or support to your salespeople. You set up them — and your company — to fail. As we’ll soon see, if you employ salespeople, you need to be closely involved in their work.
- Looking for a silver bullet
Many business owners secretly hope that a salesperson will be the answer to their prayers, the panacea that will catapult their company into the Fortune 500. While a good salesperson or sales force can make an enormous difference, they are rarely silver bullets. You still need to invest considerable time and resources to market your company, and to manage and develop your salespeople. Sorry, but there is no silver bullet.
- Poor hand-offs
A third problem happens when the sales team hands a deal off to the technical team. These hand-offs lead to both internal miscommunication and prospect/client frustration. Salespeople and technical people speak different languages. Salespeople sometimes don’t sweat the details of scope when they close a deal, while technical people do. Salespeople sometimes make promises to clients in order to edge out the competition, while technical people would rather under-promise and over-deliver. The upshot of this situation — if it’s handled poorly — is that both your clients and your employees are unhappy during the transition from proposal to actual work, and your reputation suffers.
- Not communicating expectations
As the owner of your company, it’s up to you to set specific revenue goals for your salespeople, and to identify expectations about the types and frequency of activities that your salespeople should undertake. That way, everyone knows if they’re meeting expectations. Unfortunately, many IT professionals fail to communicate expectations clearly to their salespeople. When that happens, it’s common for salespeople to think they’re doing fine, while the business owner sees them as failing to perform.
- Wrong compensation
Salespeople are mercenaries at heart, and that’s a good thing for you. It’s easy to figure out how to keep them happy: pay them! However, though it sounds simple, coming up with a compensation scheme that works for everyone is a challenge. Some compensation plans are so generous that salespeople lose their hunger. Others are too stingy to attract top salespeople and keep your top performers. The wrong compensation plan will lead to increased turnover — especially of your best people.
- Failing to pull the plug
There’s one rule in sales management that works every time: out of every ten salespeople, three will be duds, five will be mediocre, and two will be superstars. It’s extremely expensive to waste your time with the three duds and five mediocre salespeople. If you have a mediocre or poor performer trying to sell your services, you cost yourself lost sales, and hurt the morale of more productive employees. Still, many Web business owners keep poorly performing salespeople around too long, instead of pulling the plug and finding a superstar.
- Hiring the wrong type of salesperson
There are two types of salespeople: those who generate new accounts, and those who develop existing accounts. Most Web designers want salespeople who can generate new business, because they’re already good at developing relationships with current clients. They want the type of salesperson who can make cold calls, build new relationships, and close a deal with a new client (or bring a deal to the owner, so they can close it). Unfortunately, those same Web designers are often unclear about exactly what kind of salesperson they want. They get the wrong type, and are disappointed.
- Lack of common language to discuss the sales pipeline
Just as you need a language to discuss the process of designing and building a Website, you also need a language to discuss sales. Without this common language, you have no idea whether your salesperson is performing or not, or how much business has a reasonable expectation of closing.
- Poor marketing and tools to support the salesperson
Study after study shows that tele-marketing and cold calling don’t work in a vacuum. Salespeople need solid marketing collateral, messages, and campaigns that get prospects interested to meet with them. They also need a solid understanding of the services you offer. If you don’t provide this support, it’s your fault when they fail.
- Neglecting to develop the salesperson’s skills and knowledge
Finally, salespeople are professionals, just like Web designers. They need ongoing development if they’re to continue to get better and stay energized. If you don’t provide that development, your salespeople will either begin to languish, or go elsewhere.
With these issues in mind, let’s look at a step-by-step process to recruit and retain successful salespeople…
Develop a Detailed Job Description and Set of Expectations
When you choose to recruit a salesperson, start by identifying exactly what you want that person to do. As noted above, there are two types of salespeople: those that open new accounts, and those that develop and nurture existing accounts. Most business owners want the former.
Therefore, develop a detailed job description that includes any of the following elements:
- Proven track record attracting new clients and generating $X or more in new business annually
- Comfort with, and a proven track record of making cold calls to follow up on direct marketing letters in order to generate appointments
- Proven ability to get past the gatekeeper and reach top decision makers — then, get them interested in moving forward
- Proven track record targeting small- to mid-sized businesses (you should specify your industry focus, if any)
- Ability to follow up with prospects in order to develop the relationship over time and convert them to clients
- Ability to work closely with non-sales people to communicate pipeline and activity status
- Proven track record selling professional services (ideally marketing- or IT-related)
The Irony of Finding Sales Talent
Finding sales talent can be as challenging as finding new clients. You have to consider your search for good salespeople to be no different than any other marketing or sales effort. You have to find a large list of prospects, and attract one or more of them to join your firm. Of course, this state of affairs is ironic: you need to be a good salesperson in order to attract someone to help you with sales.
While advertisements can get you plenty of resumes, I’ve found the best sales talent by going to my network. The same people who can refer you clients are also a great source of potential salespeople. Ask them about the best salespeople that approach them, as well as any salespeople they know who are performing well, but aren’t happy with their current employment situation.
The Interview Process
When you interview candidates, the four key questions to ask yourself are:
- Would I take their call?
- Would I meet with them?
- Would I buy from them?
- Do I want to work with them, especially during bad times?
At the same time, ask them some tough questions. Confirm the specific results that you solicited in your job description, and verify their accuracy by calling each candidate’s references. Ask any or all of the following questions during the interview:
- What are your financial goals? How much money do you want to make this year?
- How do you get past gatekeepers?
- How many prospects do you need to cold call to get an appointment? How many calls do you make each day?
- What’s your philosophy of selling? If you were going to teach me how to sell, what are the top three things I would need to know?
- Lots of sales people say they will cold call during the interview process. Once they get the job, they make calls diligently for the first two months or so, and then stop or get lazy. How do I know that you will keep hitting the phones to land new clients and meet your goals — without my having to nag you?
- How do you keep from burning out?
- What are the steps in the sales process as you define it? How would you estimate the probability of a closed sale at each point in the process?
- What kind of pipeline reporting do you do?
- How will you manage the handing off of projects to technical staff?
- What activities do you carry out, and in what quantities, to generate new clients?
- Would people say that you’re a "closer"? Why?
- How long will you need to land our first new client?
- How do you speed up the sales cycle with a prospect who’s delaying?
- How do you know if a prospect is qualified?
- What part of the sales process is least enjoyable to you?
- Tell me about a time when your boss didn’t think you were performing, and explain how you reacted. Was your boss right? How do you handle conflict and tough feedback?
- I don’t know much about selling, and really don’t like selling at all. But at the same time, I expect results. Help me understand how — or if — we can work together given this state of affairs.
- How should we communicate about the pipeline? What is your experience with creating pipeline reports and sales forecasts, then meeting them?
- Where and how did you learn how to sell?
- Tell me about a time when you were unsuccessful selling, and what happened next.
Compensation is King
The key to a good compensation package is that you pay your salesperson(s) for getting the results you want them to achieve. The ideal compensation package would have two components:
- Pay a commission based on gross margin or profit, not on sales. That way, they think about customers as profit centers, not revenue centers, the same way you do.
- Pay them commission only, with no base. After all, top salespeople are willing to bet that they will be successful.
In reality, the first of these components can very easily be made part of your compensation plan. It should be easy for you to calculate gross margin or profit with a simple, consistent formula that everyone understands.
Meanwhile, a commission-only structure is also doable, but is less common. Believe it or not, plenty of small IT professional service firms have hired very good salespeople on a commission-only basis. You have to keep looking, and have a realistic projection that shows how much salespeople can make if they succeed. However, you don’t want your salespeople to be so desperate that they’d do anything to close a sale. I recommend you provide a small base salary so that they have enough to cover their living expenses — especially during their first few months with you.
Be careful to avoid creating a compensation structure that will cause your salespeople to get fat and happy too easily. During the "dot com" heyday, I worked with one firm that paid their salespeople an $80,000 base plus 30% of the gross profit of any sale they made. These salespeople made $250,000 each year basically for doing no more than taking orders. When demand plummeted, they forgot how to go out and get new clients, and had made so much money during the past few years that they didn’t want to. The owner had to fire them and start again.
If you’re rewarding your salespeople for finding new accounts, give them a big piece of gross profit for the first six months to a year for sales generated through new clients, then little or nothing for sales that emerge from the ongoing relationship. That way, they’ll focus on getting new accounts.
Your compensation scheme should also include a fair plan for how your salespeople will be paid if you terminate your relationship. They should receive some portion of their commission for any leads they generate, which close after they leave, as well as the commissions that were due them if they had stayed. That way, they are less likely to steal clients away from you (even with a non-compete agreement in place), and are less likely to bad mouth you to others.
Once you develop a compensation plan, create a table that shows your prospective salespeople what they can make at different levels of performance. Make sure that your table is compelling and realistic. If it is, you will attract plenty of top candidates.
Finally, if you find a great salesperson, pay them well and do what it takes to keep them. There’s a famous Harvard Business School case study about a company whose salespeople earned more than the CEO/owner. The case study led to the conclusion that this situation is fine because the CEO wouldn’t make half as much without the sales force, and can always sell the company for lots of money thanks to having this crack sales team in place.
Make The Job Easy With Excellent Marketing
Few salespeople can sell in a vacuum. One of the most important jobs you have — with or without salespeople — is marketing. You must work to ensure that prospects are receptive to your salesperson’s calls. To do that, make sure the following elements are in place:
- A strong marketing message that explains the problem your company solves and why it’s unique
- Excellent marketing collateral (from a top-notch Web presence to white papers, articles, direct marketing letters, etc) that attracts prospects
- Campaigns that make your business visible to prospects so that they know your firm’s name, and what it does, before they get a call from your sales team
- PowerPoint and other presentations to help the salespeople make their case
- Tons of testimonials and case studies proving that you are a unique company that gets the results and provides the value that your prospects want
Train Them (and Yourself!)
Even if you don’t know much about sales, you should still take an active role in getting your salespeople up to speed.
For instance, go on sales calls with them. Make phone calls with them, too. Even if you both stumble over your sales scripts, you will learn together and develop a stronger relationship. You will know how hard it is to generate interest, and they will respect you for rolling up your sleeves and trying.
Make sure they understand your services and products, as well as their limitations. Be sure that they can communicate the business benefits that your services and products create, so that they are not focused only on technical features.
Invest in their formal training by choosing an IT or professional sales system and paying for them to learn it.
Finally, you have an obligation to understand sales as much as you can. Study techniques and strategies to "make rain" so that you have a high-level understanding of what works. Also, see the blog "Essential Reading for Web Businesses" on SitePoint for a selection of related resources.
Manage Your Pipeline
It’s essential that you have effective discussions with your salespeople about the pipeline and sales forecast. To do that, you first need to have a clear, mutual understanding about what you expect from the salesperson in terms of revenues (monthly, quarterly, annually) and activities (number of calls, number of visits). That way, there will be no surprises if you need to tell the salesperson that you are not satisfied with his or her performance.
You also need a common language about the stages of the sales process, the probability of closing a deal at that stage, and the total revenues you can expect in the near future.
Following are some of the stages in a sales process, along with the probability of your received a signed contract at each. You can refer to these stages, or create your own, in order to establish this common language with your sales force:
- Qualifying: The salesperson has confirmed a compelling need or event that has caused the prospect to be interested, determined the prospect’s budget, is speaking to all of the decision makers involved, and has a clear process mapped out for making a decision. If these elements are in place, the deal has a 25% chance of closing. Therefore, you can count a potential $10,000 deal as $2,500 in the pipeline.
- Solution: You understand the prospect’s criteria for moving forward, and have developed and presented a solution that meets their criteria. The prospect has agreed that this solution will solve their problem and wants to continue discussions. At this phase, you can assume a 50% chance of closing. A $10,000 deal is now worth $5,000 in your pipeline.
- Commitment: You have positioned your solution to beat any competitive solution, and you’ve also won over enough key decision makers to tilt the balance in your favor. Even if there is no competition, you have won over enough people for them to want to move forward with your firm. Assume a 75% probability (but only if you have addressed the previous stages).
- Engagement letter: The prospect has told you they will move forward, pending a formal engagement letter, which you have provided. Assume 85% probability.
- Signed: Assume 100%.
Once you agree on the sales process, you should have frequent (at least weekly) business development meetings to review and update the pipeline. These meetings also serve as the place to discuss how the sales person will hand off deals to the development team when appropriate.
The key is to remain involved in the sales process, using the pipeline — and a common understanding about it — as a way to do that.
Know When to Pull the Plug, and Pull It
As noted earlier, most salespeople don’t work out. Personality tests, sales aptitude tests, and raw intuition rarely turn out to be good predictors of sales success in small businesses. Therefore, be prepared for churn in your sales force. Treat it as a fact of life. Be ready and willing to remove a salesperson that isn’t performing after three to six months.
The opportunity cost of having mediocre performers on your team is too great to keep them around for long.
Once you find that superstar, do what it takes to keep him or her happy.
An Uncommon But Effective Model to Build an In-house Sales Force
Some professional service firms have developed a model for creating a sales force that is quite profitable, and doesn’t involve recruiting sales people per se. Instead, these firms recruit excellent developers and project managers who also have the personality traits to be good salespeople.
They pay these people well (because they are hard to find), and gradually groom them to take on more and more sales responsibilities. Those who attract clients eventually move up to a "partnership" position, with significant compensation and even an equity stake in the company. Those who aren’t able to sell still remain on board as developers.
Essentially, this model creates a bunch of business owners building their own practice within your business — while you and they benefit. All you have to do is pay them well enough, and create enforceable non-competes, so that they don’t leave you and take their client base with them.
This model is expensive, and requires an investment in training and grooming. However, the firms that have implemented it have found that they can grow much faster and larger over the long haul than comparable firms that don’t. Also, they eliminate many of the problems of having a separate sales force that isn’t made up of technical people.
As we’ve seen, hiring and retaining even one good sales person can be a significant, time-consuming challenge. The rewards can be worth it, but only if you’re willing to invest the time to recruit and manage the right people. Whatever you do, do it 100%. Don’t abdicate responsibility or assume that a sales person is a silver bullet that will solve all of your problems with little or no work on your part.