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Whitepaper: Commission Only Sales Organisations
 

Whitepaper: Commission Only Sales Organisations

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Sales outsourcing organisations are often been asked about the possibility of undertaking commission only sales engagements for clients. In many cases sales outsourcing agencies do not like to ...

Sales outsourcing organisations are often been asked about the possibility of undertaking commission only sales engagements for clients. In many cases sales outsourcing agencies do not like to undertake commission only projects, preferring the availability of some form of monthly retainer.

This whitepaper was written in response to these requests, and to discuss the various thoughts that a vendor and potential sales outsourced supplier may have, enabling a constructive discussion to take place.

The paper relates to ‘business to business’ situations only, and is aimed mainly at technology companies selling software and/or services, the issues raised however are applicable to other sectors.

We believe there are many issues and practical problems with commission only sales and these are discussed along with some potential solutions.

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    Whitepaper: Commission Only Sales Organisations Whitepaper: Commission Only Sales Organisations Document Transcript

    • Whitepaper: 11 Issues Why Commission Only Sales Works / Does Not WorkBy Selling PeopleAugust 2012www.sellingpeople.bizCopyright © Selling People (SMDI Ltd), 2012 Contact: www.sellingpeople.biz 020 3397 3270 Version 4 Page 1 of 16
    • Whitepaper – Commission Only SalesContents..........................................................................................................................................................11. Overview...................................................................................................................................32. Background ...............................................................................................................................33. Direct or Indirect vs Sales Outsourcing ....................................................................................44. Forms of sales outsourcing .......................................................................................................55. Examples ...................................................................................................................................76. Does it work in high technology? .............................................................................................87. Possible solutions in high technology.......................................................................................88. The outsourcer’s view ..............................................................................................................99. Commission rates .................................................................................................................. 1010. Where the risk should be held?......................................................................................... 1111. Checklist............................................................................................................................. 1112. Commission only Issues ..................................................................................................... 1213. Issue - Investment considerations (again) ......................................................................... 1314. Alternatives ....................................................................................................................... 1415. Issue - Commitment .......................................................................................................... 1416. The solution ....................................................................................................................... 1417. Summary............................................................................................................................ 1518. Selling People .................................................................................................................... 1519. References ......................................................................................................................... 16Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 2 of 16
    • Whitepaper – Commission Only Sales1. OverviewSales outsourcing organisations are often been asked about the possibility ofundertaking commission only sales engagements for clients. In many cases salesoutsourcing agencies do not like to undertake commission only projects, preferring theavailability of some form of monthly retainer.This whitepaper was written in response to these requests, and to discuss the variousthoughts that a vendor and potential sales outsourced supplier may have, enabling aconstructive discussion to take place.The paper relates to ‘business to business’ situations only, and is aimed mainly attechnology companies selling software and/or services, the issues raised however areapplicable to other sectors.We believe there are many issues and practical problems with commission only salesand these are discussed along with some potential solutions. At the end, this paperraises 11 significant issues for consideration.2. BackgroundMany start up and small organisations, or new divisions of existing larger organisationswith new products and service offerings, are starting to consider sales outsourcing as anoption to build their sales functions.Existing business, built on relationships and referrals, faces a new dynamic when aprofessional sales strategy is employed, and the sales activity becomes outbound.In many industries the outsourcing concept is not only familiar but also very popular.Consider IT services and HR, to name but two.In these cases the main drivers are cost reduction. However, sales outsourcing it is moreabout increasing revenue and improving process and practices, and providing a bettermore flexible and focussed solution.Surprisingly, few organisations have so far considered outsourcing their sales function.So what does a sales outsourcing solution look like? There are several differentoutsourcing services or models available, the basic options and services provided aredescribed belowSales – the key aspect of the solution is of course the sales resource. For relativelysmall value sales, less than £1500, probably telesales, otherwise field sales executivestaking qualified leads and closing them down, and signing up additional business.Outsourcing provides much flexibility, for instance, rather than one full time resource; asolution may use two part time resources. Such could be split by territory, geography,product or industry vertical, thus providing a more focussed solution.Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 3 of 16
    • Whitepaper – Commission Only SalesLead generation – all organisations need good quality leads and almost all salesoutsourcing models include a lead generation component. Many sales people are poorat generating leads; in an outsourced solution this function is often undertaken bydifferent people to avoid the feast and famine regime so typical in many organisations.This activity could typically be an e-marketing programme combined with telemarketing.Sales management – once a small team of people is in place then some managementtime and activity will be needed. Even where provided by the sales resource, thefunctions of management exist in any engagement; forecasting, reviews, managing thepipeline etc. However, some organisations can make good use of an experienced salesmanager or director to help with their strategy, management and also being a lead salesperson.Facilities – typically the outsource provider will bring experience and facilities, thesemay include: offices, CRM / contact management systems – usually web based, phoneand reception services, PCs, networks etc. All of these items enable a rapid start up andreduce initial set up costs.A sales outsourcing solution usually combines some elements of all of the above.Examples of sales outsourcing in other industries are given in this paper, for furtherdetails concerning outsourcing; please see the whitepaper listed in the referencessection at the end of this document.A commission only arrangement could apply to a single sales person or an entire teamproviding a solution.3. Direct or Indirect vs Sales OutsourcingWhen organisations are deciding on a ‘go to market’ strategy, there are usually two mainchoices to make. Do you sell direct to end users and customers or develop a saleschannel of distributors and resellers?Either option will need a sales force of some type, even if it just to ‘set up and prime thepump’ for the resellers in the indirect approach.The main differences between the two approaches are listed in the table below:Issue Direct Channel**Ownership of clients Vendor DistributorMargin 100% 40-50% to distributorControl of sales cycle 10% 90%Configuration of solution 10% 90%Costs of sales resources High – employees with basics, Low or non existent commissions, expenses, phones, cars, holidaysRisk of loss Medium SmallRisk of high profit Medium MediumTime to revenue Short Medium – 2 stages nd rdPost sales support All Only 2 or 3 lineImplementation revenue All Licence fees only to vendorCopyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 4 of 16
    • Whitepaper – Commission Only SalesFocus on vendor product Total Partial, will have multiple productsLoyalty 100% Loyalty is to the highest margin.Transparency of operation High, full visibility Low** Many different channel models exist including those with multiple tiers but this paperdoes not attempt to define or explain all of them, however the general principles of adistribution model are assumed.Depending on the vendor organisation’s attitude to risk, and availability of fixed andworking capital, their knowledge of and access to the chosen markets, will determinewhich approach an organisation prefers.The use of a distributor/reseller will typically provide access to the vendor of its existingcustomers, new markets and domain knowledge, or all of these.However, the problem with any distributor is that the product marketed by that vendoroften comes secondary to selling its own services, or in the case of a VAR or reseller,part of a solution involving several products. Systems integrators can also act as achannel, though will not usually be tied to a particular vendor, and may recommendseveral alternative solutions to clients.For these reasons many vendors only use the channel when they cannot afford theinvestment, or when specific domain or geographic knowledge, such as when setting upoverseas is required. The vendor may also reserve an option to buy out the distributor atsome future point when the business is established.If you are really looking for a distributor then you have a different value proposition tothat sought by a sales outsourcer, and must be careful not to be confused by thesimilarities between the fundamentally different approaches. Sales outsourcing is, in ourview, more closely related to direct sales than a distribution/reseller model.Sales outsourcing can be used to support both models though, and is an alternative wayof establishing your chosen distribution or go to market method.The indirect/distribution model is of course a form of commission only sales.4. Forms of sales outsourcingA sales outsourcing solution is in effect your own dedicated sales force, whether it is adirect or indirect sales model you wish to follow. It is however, managed on a day to daybasis by a third party.So how does sales outsourcing compare to the self managed/in-house direct andindirect sales approaches.In most cases an outsourced solution sits mid-way between the direct and indirectmodels. However, the differences depend on the type of charging arrangement enteredinto with the outsourcing vendor.Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 5 of 16
    • Whitepaper – Commission Only SalesThere are several main types of sales outsourcing contract engagement. All of themshould provide a rapid, flexible and responsive solution, with low upfront costs: Time and materials basis – where the costs of the outsourcer are passed on, plus a margin, to the vendor. Full details of all costs are detailed; the contract is very transparent and would normally have a termination or variation clause period of only two to four weeks. Commission is paid but only at the rate at which a sales executive could earn – usually 5-10 per cent on software. This mode of operation is very relevant in a start-up, or test marketing phase, where there is no track record of sales success provided by the vendor. Deliverables – in this case the contract identifies key deliverables and payment is based on achieving these. The delivery targets could be activity based such as Surveys with senior decision makers or meetings, or could be based on pipeline or order values Base + commission – is essentially a variation on time and materials, but the sales fees charged are costs less a margin of typically 10-30%. Therefore the outsourcer will only make a profit if product is sold and commission/margin shared between the vendor and outsourcer. Set up costs would normally be charged for. Commission only has no external on-going fixed costs to the vendor, though there could be, and usually is, a negotiated set up cost, particularly in new markets or with new products. When sales are made a relatively high commission (20-50%) is paid to the outsourcer, similar to the rates paid for a distributor. This will provide the lowest profit to the vendor as more commission / margin is being paid out.The following table provides a comparison of the approaches:Item Time and Base + commission Commission only materialsOwnership of clients Vendor – you Vendor – you are The outsourcer will are buying the buying the sales probably want to own the sales service to service to represent customer relationship like a represent you you distributor would. Sales opportunities are usually registered for 90 days.Margin (margins overall For software, For software typically 40-50% as per a distributorare very dependent on deal paid as sales in the 20-30% range –size and sales cycle and commission , midway betweenvolume) typically 5-15% sales commission and distributor margin.Control of sales cycle Vendor Vendor OutsourcerConfiguration of solution Vendor Vendor OutsourcerCosts Moderate Moderate LowCopyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 6 of 16
    • Whitepaper – Commission Only SalesRisk of loss Moderate Moderate LowRisk of high profit Moderate Moderate HighTime to revenue Short Short Medium – channel needs to be geared upPost sales support n/a n/a n/aImplementation revenue Yes Yes PossibleFocus on vendor product Yes Yes Possible.Loyalty High High Very low – only to the next deal and margin. Contract may be usurped by competitor or new direction for company.Transparency High High LowFlexibility for change, new High Medium Lowdirection etcExclusivity required No No Probably5. ExamplesIn other industries, such as financial services and pharmaceuticals, the commission onlymodel is well established. However, the key features of these markets are widespreadgeographic territories mainly selling to individuals and small corporates.Well established brand names, with large corporate marketing expenditure, under whichindependent sales agents can operate.An example would be Citi-Financial, now defunct. This was part of the Lincoln FinancialGroup, a huge US financial services conglomerate. Whilst very successful for a period oftime, the whole industry was known for its sharp practices and miss selling, particularlyof endowments and pensions.In manufacturing markets, in certain countries such as the USA with its large geographicchallenges, it is a well proven model with the use of manufacturers’ representatives oragents. This model has also been used in the UK.There is a web site specialising in linking products and UK sales people who want tooperate on commission only sales: http://www.sales-agents.com/However, if you look for technology products under the heading:Business Advising, Consulting, SoftwareYou will find there are few companies selling via this method.Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 7 of 16
    • Whitepaper – Commission Only Sales6. Does it work in high technology?We are not 100% sure but we are not aware of any successful implementations. Wehave to look quite hard to find examples of commission only sales working in the ITsector.An example of one such organisation is given below; this vendor had an interestingapproach: They were a UK ERP vendor and recruited a commission only sales force who were then formally trained and provided with marketing collateral. However to incentivise the sales force and assist them, the vendor undertook a comprehensive lead generation programme based around seminars. The company invested in marketing and lead generation support to run a monthly series of seminars to which between 15 and 25 prospects attended. The sales executives attended these events, and were given an allocated list of names to speak to at the event and follow up. This approach ensured that each sales executive was given a certain number of leads to keep their activity levels up. This is relevant as many sales executives are indeed poor at lead generation.These examples highlight the differences between technology offerings and commissiononly ‘successes’, which are typified by a short sales cycle and relatively simple productoffering. This compares with IT/technology which often has solutions with long andcomplex sales cycles, sophisticated product offerings, with multiple vendors.Whilst the ERP method shown above was reasonably successful, but not necessarilymore effective than alternatives, the past to success is strewn with failures. The mainproblem is recruiting and retaining quality staff. A sales person who is paid no basic isalways tempted by a company offering him a basic!7. Possible solutions in high technologyA model that may work with either individual sales executives, or with an outsourcingcompany, is a hybrid model. In this model the vendor pays for the marketing and leadgeneration activity or undertakes this activity internally. This may be provided at cost bythe outsourcer. The sales resource then undertakes the sales activity free of charge inreturn for a commission.This approach effectively gives the sales resources a modest “basic salary”. If you aredealing with individual representatives or sales contractors, rather than a salesoutsourcing company, then this will usually be the key factor to them.Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 8 of 16
    • Whitepaper – Commission Only SalesA variation on this is to pay the outsourcer to develop the joint sales and marketing planand set up process. This shows commitment on both sides. A commission scheme alsoneeds to be devised.Consider a scheme that initially pays 100% commission! This clearly means that thevendor has some costs to deliver the business in most cases, but the outsourcer canearn a high commission to boost his profits in the early stages. After the first deal(s) thescheme can be gradually reduced to the usual level.There are pros and cons of any sales channel or model, but in our opinion in thesoftware and services industry, typified by complex medium value and medium lengthsales cycles, and without a significant investment in marketing on the part of the vendor,the commission only model does not work.Given the need for a reasonable marketing budget, is it not worth paying a smallincremental cost to control the sales resource, rather than depend upon commission onlysales to come through?Therefore for many organisations we believe that commission only sales will not be aviable alternative, especially with new products and markets. Once a brand and a leadgeneration programme are established then perhaps commission only arrangements arefeasible.There is one other set of circumstances where commission only sales should work. Thecircumstances are where the product / service is entirely complimentary to otherproducts and services that a company or sales representative currently offers for sale.The challenge here however, is to find such individuals or organisations.8. The outsourcer’s viewSales outsourcing companies may have in depth knowledge of specific markets, (SellingPeople for instance are experts in Data Visualisation, Predictive Modelling, CRM,Business Intelligence and Corporate Performance Management) solutions or industrysectors.Where an outsourcing company has relevant niche expertise it is itself likely to pro-actively seek out software vendors whose products are complimentary to their otherofferings and negotiate a distributor commission, normally 30-50%. This is because theywill probably already have their own leads and market intelligence, and will leverage itaccordingly.However, they would not be interested in ‘just any other’ non-complimentary valueproposition. It needs to be related to their existing core value propositions. Hence if youare to approach a sales outsourcing company it can be worthwhile researching which, ifany, have a speciality in your chosen area.Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 9 of 16
    • Whitepaper – Commission Only SalesIf an outsourcing company was to consider a realistic commission only deal, what wouldhappen? Consider the following scenario: A product is to be sold by the outsourcer who allocates one full time equivalent sales executive (this may be two part time people as this provides a more focussed, flexible solution and is typical of what an outsourcer can provide). The cost of a full time sales executive in the technology sector is likely to be about £5000 per month. Consider that over a year this amounts to an investment in your company of £60,000. This is a typical basic salary figure for a sales executive, if you were to recruit someone directly. Now consider how much marketing support for lead generation you are putting into the product? If you are spending £10,000 per month to undertake marketing, brand awareness and lead generation, the outsourcer will be very content and will have high expectations of sales success. However, if you budget to spend £0 for marketing, the outsourcer is not going to be content and is taking a far higher degree of risk, and in reality will have to undertake the marketing as well.So if the vendor is expecting something for ‘free’, other than paying a commission, inreality there exists an expectation of a full sales and marketing operation to be providedby the outsourcer. Is this reasonable?Particularly for new products, should the vendor not pay for the initial marketing of theproduct or service, especially for ‘me too’ type propositions, such as web design orproject management (any services proposition?), where there is little if any productdifferentiation.9. Commission ratesTypically in software companies commission rates vary from 5-15% with the top ratesbeing for new business and above quota performance.Software products sold through distributors and VARs typically attract margin rates of20-50%.Therefore in an outsourcing deal reflecting the same sort of rates can be expected forthe time and materials based model or the commission only based model. If some formof hybrid deal is done where the costs of the outsourcing are reduced but not free, thenan intermediate commission 10-30% is probably reasonable.Details of commission schemes are beyond this paper and they need to be worked outcarefully. Rates will vary significantly depending on deal size and length of sale cycle.Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 10 of 16
    • Whitepaper – Commission Only Sales10. Where the risk should be held?Clearly the risk reward model can vary, but an entrepreneur or business manager cannotexpect to offset much of the risk with ‘me too’ value propositions and new unprovenproducts. Service propositions such as web design or project management also fit intothis category. You cannot patent intellectual thoughts and processes for a good reason.However if you have a ground breaking or disruptive technology then this may be fairgiven the significant potential.Therefore the provision of commission may not be enough on its own to incentivise acontractor or outsourcer.If it is only commission on offer then the outsourcer may be interested in yourproposition, but may then look for a ‘better’ more established product in the same marketi.e. your competitor. A possibility is that they will use you to learn a product area andthen go and take that knowledge to find a better established competitor product that theycan sell in place of, or as mentioned previously in addition to your product. You thevendor, can’t lock them in of course, because you are not really offering anything?Does this apply to services? Not really. Any organisation can have any service offeringor at least give the appearance of having an offering. The unique selling points (USPs)are not easy to determine. When a services company is asked what its USPs are theyrespond with: “We are good guys, experts in what we do” “We have good customers and reference sites”Unfortunately everybody says the same, and trying to articulate and differentiate to aprospect on the phone really does not work very well!11. ChecklistWe list below a few items that you need to have at least prepared for the outsourcer, orbe prepared for the outsourcer to develop with you or on your behalf. A sales & marketing plan – clearly outlining why as the vendor you are not doing this direct, or through established channels. Some of the key aspects of the plan are: Clearly written down and articulated value propositions. If you do not have this they would normally be developed as part of the sales and marketing plan. Understanding the value proposition is key to planning any form of sales and marketing campaign A lead generation plan and appropriate contact data A defined sales process with appropriate pre-sales and support and hand over process facilitating post contract implementationCopyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 11 of 16
    • Whitepaper – Commission Only Sales A clearly defined commission scheme based on revenue/margin – is this paid on order or on collection from the customer? If commission is on services, is this paid on order or revenue recognition, and how long does the commission period run for? What about additional sales made by the sales team or the implementation team/ project manager? Would you consider 50% commission? – usual for distributors Would you consider 100% commission for a period? This will allows the outsourcer to build up a profit cushion Should the outsourcer accept 0% commission on the first deals - especially if they have not paid to buy into sell your products? Supporting marketing collateral – fact sheets, web site, brochures etc Established references and written up case studies A price list and a contract for customers to sign A post contract support programmeWithout the above the start of sales activity will be delayed and the outsourcer wouldexpect to charge you to develop them.12. Commission only IssuesSo you now have a potential commission only sales outsourcing partner lined up, whatare some of the issues that you should consider: 1. Ensure they are just not desperate to get involved because they cannot do anything else. This is particularly relevant to using individuals rather than companies. We have seen this many times and there is no loyalty without any basic salary. 2. Ask for a sales plan, because you want to know how they are going to sell your product. What are the activity, pipeline and sales targets? Even if the deal is ‘free’ the vendor still has an internal cost to train and support and work with the outsourcer. 3. Whose brand or company name is being promoted? – it is the outsourcing company’s name probably – they want to build and own the relationships with the customers. 4. Will the outsourcer focus on your products or will it be a complimentary sale at best, or an afterthought. If an outsourcer has a choice, then pro-active resources will normally be put into products with lower risk and modest margins but where basics can be earned. 5. Higher margins are paid out and hence you make less profit than if you undertook a direct sales approach. 6. You do not build up the market intelligence as you are not in the field and the outsourcer is unlikely to be incentivised to provide you with all the contact data, unless you pay for it.Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 12 of 16
    • Whitepaper – Commission Only Sales 7. The outsourcer having found qualified leads for the vendor and the proposition is quite likely to resell this lead to other vendors, to maximise their chance of a successful sale. Hence as a vendor you may find lots of leads but still lose them, or find significant competition, hence increasing your cost of sale. 8. Any partner ‘worth their salt’ would want exclusive access to a market. If this is granted and the subsequent campaign is a failure you have wasted a lot of time and effort getting nowhere. If you do not provide exclusivity you have virtually no chance of ensuring any commitment. 9. Companies and sales executives, given human nature, unless well off or very well established will always prefer a basic plus a commission rather than commission only. 10. How do you establish if a sales outsourcing company is successful? You could look at their accounts and take up lots of references – largely irrelevant, as past performance is little indicator of future performance unless you can identify the individuals involved specifically. 11. Many leads that are thought to be of good quality by the sales executive or sale outsourcer may be ‘lost’ by the vendor either purposefully (lead determined as not fit for purpose) or through incompetence. How will you handle this situation?13. Issue - Investment considerations (again)If we take the earlier example of a single full time equivalent sales executive at £5000per month, viewed as a £60,000 annual investment in your business, how would that betreated by the outsourcer?If the investor was a bank they would treat this not as an investment, but as a loan.Typically in a small company this would be guaranteed on the director’s assets, usuallytheir property. If the investor is a venture (vulture!) capitalist or an Angle investor theywould provide the investment in return for equity in your company.If a sales outsourcer puts in £50-£100k can you provide them with the information toundertake the appropriate level of due diligence, commensurate with the risk the investoris taking.In reality you may not want to give this information, or may not be able to, especially in astart-up situation.Even if you are prepared to give away your equity, how much of it and what is yourcompany worth? Traditionally companies are valued by taking out the MD or key ownerand valuing what is left. So in reality many small companies are probably worth nothingin the early months or years. So even if you are prepared to hand over some equity, itmay not be worth much and therefore you have to give away a significant percentage.Finally, the logistics of setting up the capital structure can take a lot of time and money.Perhaps it is much better to spend this money on sales outsourcing?Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 13 of 16
    • Whitepaper – Commission Only SalesUK and USA readers may be familiar with the TV programme “Dragon’s Den”. This isentertaining TV about entrepreneurs asking potential investors for money. Apart frombeing an object lesson in how not to negotiate, the programme illustrates the large equitystake percentages, of the fledgling, company professional investors are expecting totake – usually 25-50% for modest investments.14. AlternativesIf a sales outsourcing company is planning to invest £5k per month on a sales project,what else could they use this money for?Well they could employ two of their full time telemarketers to go out and find outsourcingbusiness or lead generation campaigns that fit their ‘chargeable ‘ business model. Thereare many companies out there who understand the value proposition, the flexibility andfocus and low risk approach that sales outsourcing can bring. An outsourcer wouldusually want, as a minimum, their set up and training costs to be covered?What products would they sell? Ideally well-established proven products or those whichhave clear advantages over competition or disruptive technologies, for which there is alot of noise in the market, or a clear proven demand.15. Issue - CommitmentOne of the key issues to be raised by the outsourcer will be – if it is such a good, easyproduct to sell, as you have no doubt outlined to the potential sales partner – why is itnot selling itself and why are you not committed to selling it yourself?Some vendors plan to have multiple sales partners. This could show a lack ofcommitment to the channel or product, unless there is a clear strategy. It could appearlike ‘spraying and praying’ the product widely into the market in the hope that there willbe some success, somewhere.However, the downside, even if in the unlikely event that this approach is successful, willbe lots of failures, and your standing or reputation in the market is at risk fromdisreputable sales representatives and companies – note the financial servicesexperiences referred to earlier.A bespoke, funded outsourced sales solution can provide you with the control andcommitment you probably need. In truth, spending more time with a chosen salespartner is likely to lead to quicker and better rewards.16. The solutionSales outsourcing can be set up in a carefully controlled way in order to share the risksensibly between entrepreneur and service provider.Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 14 of 16
    • Whitepaper – Commission Only SalesThe whitepaper – Sales Outsourcing Alternatives listed in the references section givesmore details on a recommended approach.However the sales outsourcing methodology in simple terms is: 1. Build a focused and realistic joint sales and marketing plan that meets your expectations in terms of cost budget and revenue targets. 2. Test market and sell your key value proposition(s) for 3-6 months with minimal investment and resources, though sufficient to build up sales momentum. 3. Role out the programme and negotiate a win/win deal based on the results of the test phase and re-evaluate the plan.If you assume you will pay for the development of the plan and the test sales andmarketing phase we feel this is a sensible compromise.The approach is fair to both sides and allows a sensible outsourcing contract to bedeveloped. The detailed nature of a sales outsourcing contract is almost impossible todetermine without the test phase.17. SummaryOn the whole we are sceptical about the applicability of commission only sales in thehigh technology sector, particularly with service propositions. The sophistication of ITsolutions and the length and complexity of sales cycles are not conducive to commissiononly sales approaches.We believe a better approach is to construct a carefully planned, conservative testapproach to a market, whilst keeping a careful eye on costs and only expandingresources when success has been proven.18. Selling PeopleSelling People was founded in 2003 and has rapidly become Europe’s leading salesoutsourcing agency. SP has provided market evaluation, lead generation and salesoutsourcing services to a variety of companies.Selling People is UK based but is part of the Branch Service operation with offices in 20countries and 60+ sales executives allowing us to put together pan European solutions.We operate in many sectors but our specialism is the demanding IT software salessector. Within that sector we have particular expertise in: Business intelligence & knowledge management Help Desk & service management CRM & customer service ERPCopyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 15 of 16
    • Whitepaper – Commission Only SalesWe maintain our own intelligence/data gathering system and watch and research theabove sectors as well as the UK’s top 100 IT spenders and the Mergers and Acquisitionsmarket in the UK, as these are often key to our clients.Selling People operates using a number of full time employed sales and telemarketingexecutives, including in-house project and sales management. We supplement this withexternal associate resources to extend our skills and geographic coverage. Our externalnetwork consists of approximately 100 associates allowing us to operate in many sectorsand geographic areas.Selling People (SMDI Ltd) Phone: 020 3397 3270Unit 12, The Power HouseHigham Mead Email: enquiries@sellingpeople.bizCheshamBuckinghamshire Web site: www.sellingpeople.bizHP5 2AH.19. ReferencesAmazon books:Outsourcing the Sales Function: The Real Costs of Field SalesSelling Through Independent RepsThese books will be particularly useful if you are a manufacturer of some sort.Other whitepapers: see menu page: http://www.sellingpeople.biz/resourcesSales outsourcing alternatives – Selling People 2012Copyright © Selling People (SMDI Ltd), 2011 Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 16 of 16