Not all small to medium-sized businesses have the time, the capability, or the resources necessary to manage an internal sales team.
This is where the outsourcing of the sales function comes in handy.
You can get many benefits from outsourced sales management, but it is important that you understand both the Pros and Cons before making a decision.
In this article, we will discuss what outsourced sales management entails, as well as its main advantages and disadvantages so that you can make an informed decision on whether or not to pursue this strategy to grow your business.
What is Outsourced Sales Management?
Outsourced Sales Management is a service that allows companies to outsource their entire sales process. From setting up the infrastructure to finding new leads and closing deals – an organization can hand over these tasks to qualified individuals who are experts in sales and sales management.
If done correctly, Outsourced Sales Management can save you money as you no longer need to hire, train and retain internal staff to do this job.
When should sales be outsourced?
There are three main situations in which you should consider outsourcing sales:
- You do not have the ability to manage an internal sales team
- You need to ramp up the sales function in a very short period of time
- You need to enter external sales assistance to enter a new market
Let’s look at each of these points more closely.
You don’t want to manage a sales team
Many companies, especially small ones, do not have the ability or the manpower to hire, build and manage an internal sales team.
In this case, it makes sense to outsource sales as you can get access to the best talent without having to worry about managing them.
Looking for a fast ramp-up
Another common situation in which outsourcing sales is advantageous is when you need to ramp up your sales function quickly.
For example, if you are launching a new product, you may need to increase your sales team’s size and scope to meet the demand.
In this situation, it is more efficient to outsource sales as you can get the help you need without having to go through the hassle and expense of building an internal team from scratch.
Expanding in new territory/sector
The last common scenario in which outsourcing sales can be beneficial is when you need to enter a new market.
If you are expanding your business into a new territory, it is often helpful to have someone on the ground who knows the lay of the land and can help you navigate the waters.
In this case, outsourcing sales gives you access to local expertise that you would otherwise not have.
Similarly, you may be looking for entry into a new sector, and hiring an outsourced sales team might with the right connections and credibility in that sector, can be the fastest way to get your foot in the door.
Is it good to outsource sales?
It can be good to outsource sales in certain businesses in certain phases of their existence. But not always. And smart sales executes know when to outsource and when to not. They also know what to outsource and what to keep inside the company.
As we saw in the previous section, it can be good to outsource when a company is small and needs to focus on its core functions – this could be building new versions of its products or refining its services, or focusing on research and development to invent new technologies. This is why it is not uncommon to see outsourcing of sales in startups.
It takes a long time to find, hire, train, manage and retain a full-scaled and full-time sales team. For many companies, it makes sense to begin by outsourcing sales and gradually over time build their own in-house capability. Some sales outsourcing contracts envision the transfer of the entire outsourced sales team to the client after a certain amount of time.
One scenario when it is not always good to outsource sales is when the sales success depends entirely on the relationship between the sales team and the customer. In this case, the value is in the relationship and not in the products or services you are selling. This makes it risky for you because your outsourced sales team could one day stop selling your product and start selling your competitor’s product and because it is their relationship with the customer that drives the sale, you lose out completely.
Pros of Outsourced Sales Management
1. Focus on your core business functions
By outsourcing the sales function and sales management, you can focus on your competencies and on other core business functions which you cannot (or choose not to) outsource.
By outsourcing the sales function and management, you free up time to focus on marketing, product development, or even customer service.
2. Get access to expertise
Sales management is a complex process with many moving parts. It can be difficult to do in-house, especially for a small or medium-sized business.
By outsourcing sales management, you can have access to a team of experienced professionals who are knowledgeable about best practices in sales management.
They will be able to get you going with organic lead generation from our own website all the way to setting up a call center on your behalf.
3. Reduce or eliminate internal fixed costs
Outsourced Sales Management reduces the costs associated with hiring and training internal sales staff. This is the responsibility of the company offering the outsourced sales service.
Of course, this doesn’t mean that your overall costs are going to go down because you still need to pay for the outsourced sales management. But depending on the agreement you have, you could lower your fixed costs and improve your free cash flow by outsourcing the sales function.
4. Alignment between your success and that of the outsourced sales manager
Outsourced sales managers have a vested interest in seeing your company succeed, which means they are more likely to be successful in achieving your sales goals.
This is because their success is tied directly to your company’s success.
In fact, this fact can also be codified in your outsourcing services contract. You could offer the same sales incentives – bonuses, profit sharing, etc. – to an outsourced sales manager as you would to internal staff.
5. Access to a deep bench of sales management talent
Outsourced sales managers are typically a part of a larger organization with access to a wealth of talented salespeople. This means you have access to the best and brightest minds in sales management, regardless of where you are located.
This is a big plus when you consider that your larger, better-funded competitors will have top-notch sales managers who work for them.
With Outsourced Sales Management you could try and level the playing field.
6. Rapid Ramp-up
Sales outsourcing firms have the expertise and experience necessary to get your sales process up and running quickly.
So by outsourcing sales management, you can get the sales function started quickly and without having to invest in additional infrastructure or training.
And the faster you get the sales function going, the sooner you will start seeing quality incoming sales leads.
Cons of Outsourced Sales Management
1. It can be expensive
While outsourcing can reduce your fixed costs and the overheads associated with an having internal team, it’s still going to cost you.
And if you’re going to hire top talent, it can be very expensive very fast.
How expensive outsourcing is will depend on how your contracts are structured.
If you’re paying a fixed price per month without a link to performance, you may end up paying a lot for poor performance.
On the other hand, if you decide to pay mostly in the form of incentives, you may not attract the best talent or you may not get an outsourced partner to agree to your terms.
So before settling on an outsourcing partner, compare the pricing models of several different providers and invite quotes from all of them.
Weigh the advantages and disadvantages of the different options and then make a call.
2. Risk of information leakage
If you outsource sales management to another company, you’re inherently creating a risk of information leakage since your sales data will now be stored outside of your company and be accessed by those who work for someone else.
If this is a serious concern, you should avoid outsourcing sales.
However, as long as you hire a company that is reliable and trustworthy and which comes with solid references then you could (and should) include contractual clauses in your contract with them to minimize the risk of information leakage.
3. Insufficient commitment
This point is actually the opposite of the Pro we pointed out that outsourcing creates alignment between your interests and those of your outsourced sales manager.
However, the opposite can also come true.
It’s possible that the outsourced sales management company may not have same the level of commitment that you might get from a dedicated internal team.
This Con of outsourcing, however, can be countered simply by putting the right incentive structure in place (read: bonuses!) and by having a strict hiring process where you weed out candidates who are unable to show the required commitment.
Summary
Outsourced Sales Management is a popular and effective way to start and scale your company’s sales activities.
While there are many Pros to outsourcing Sales, such as access to talent and fast ramp-up, outsourcing also comes with its share of cons that you should take into consideration before deciding whether to outsource or not.
Outsourcing can be expensive and you must decide how much you are willing to spend and how you will calculate your return on investment.
Outsourcing can also lead to information leakage which is a serious risk in certain industries. You must ensure that your contract includes the right clauses about data security and confidentiality before moving forward with an outsourcing arrangement.
Lastly, it’s possible the outsourced sales manager may not have enough commitment level when compared to what you might get from an internal team. This can be countered with the proper incentives and a rigid selection process.
In short, outsourcing sales management is a great way to get your sales function started quickly and without having to invest in additional infrastructure or training; but it’s important to weigh the pros and cons before making a decision.
