Hiring your first salesperson can cause long-term
damage to your business if it isn't ready to grow. Here
are the pitfalls you should consider before increasing
your sales staff.
Every new business goes through certain critical transitions,
and a particularly important one begins the day you decide
you need to have another salesperson in addition to yourself.
Bringing on clerical help or frontline people is a different
story. You do it because you have to--because you can't
handle the work on your own. But when you hire a salesperson,
you're making a decision to grow, and how you go about
it can have long-term consequences for you and your company.
There are three major challenges you face when you hire
a salesperson, particularly the first one. To begin with,
you need to make sure that he or she is going to have
enough time to succeed. How much time is enough varies
from business to business, depending partly on the selling
cycle. In my storage business, for example, it typically
takes two years to close a sale. In other businesses,
the selling period can be just a few weeks.
Even in businesses with a short cycle, you need to give
new salespeople time to adjust to the culture, learn the
products, develop a sales base, and so on. You can't expect
them to start making good sales as soon as they walk through
the door. It's generally wise to assume that new salespeople
won't make any sales during the first year. Why? Because
you won't be able to judge their performance objectively
if you're counting on their sales to make ends meet.
When you hire a salesperson, you're making an investment,
and you have a right to expect a return on the investment
in a reasonable amount of time. Let's say the person costs
you $45,000 in salary and benefits, plus another $5,000
for other expenses (telephone, travel, etc.). Suppose
that your average gross margin is 40%. The salesperson
would have to bring in $125,000 in sales at that margin
($125,000 x 40% = $50,000) just to cover what you've spent
on him or her in the first year.
That's a tough concept for many people to understand.
Most companies don't even try to teach it. But you'll
have continual problems with your salespeople if they
don't understand how the business works and what you're
counting on them to contribute. They'll make bad sales.
They won't follow the rules. They'll constantly complain
about being unappreciated and underpaid because they don't
know what's really going on. Education is the only way
to solve these problems. You need to change the way your
salespeople think. You need a process that teaches them
the business while they do their jobs.
After you solve the education issues, there comes another
one: how to motivate your salespeople. Instead of paying
them commissions, move the best ones to straight salary.
With a salary, salespeople work as members of a team.
When you put them on commission, you're giving them an
incentive to follow individual agendas.
From: Inc. Magazine, Dec 1998 | By: Norm Brodsky
Norm Brodsky is a veteran entrepreneur whose six businesses
include an Inc. 100 company and a three-time Inc. 500
company. This column was coauthored by Bo Burlingham.