Up until recently I was the owner and lead salesperson for my company, but now that my company is growing, I think it’s time to hire salespeople to pick up my slack. What are my potential pitfalls?
–Name and Address Withheld
Who are the best salespeople? Owners. And what do owners like to do when the business starts to grow? Hire salespeople. That’s where the problems start.
There are three significant segments included in the custom installation sales process: lead generation, sales administration, and the act of selling. Lead generation includes all of the activities a salesperson might undertake to find customers, from organizing formal presentations for architects and designers, to cold calling custom builders. Sales administration is the detail work associated with setting up a sales call, doing the follow-up, and making sure that the salesperson’s time is optimized. The selling process is self-evident.
Quite often, the CI salesperson is also involved with project management. I define project management as any part of the process from development of the proposal through managing the install team.
A typical CI company is founded with a few key players. The owner (or partner) is the salesperson. The company has one or two techs. There’s another individual (employee, partner, spouse) who runs the day-to-day side of the business. No project managers are needed at this point in the company’s life.
Sales reach $1m and the owner/salesperson is jamming all day long. He’s finding the leads, making the sales calls, writing the proposals, and closing the sales. He’s involved in project management, although he may ask a lead installer to step in and take over some of the project management responsibilities.
With the lead tech taking on more managerial chores, the owner hires additional techs to fill the gap and handle the increased work volume. Life is good.
As the company continues to grow, the owner/salesperson realizes that he can’t follow up on all the leads and referrals. Plus, he stops doing any lead generation or marketing due to lack of time. In short, he’s becoming less effective as a salesperson. The typical solution? Hire an outside salesperson to pick up the slack.
There are generally two possible outcomes from hiring this salesperson. In scenario one, time goes by, and the owner realizes that the new salesperson isn’t pulling his own weight. In fact, the new guy is selling less than 25 person of what the owner sells. There are several reasons for this. The most obvious is that the new sales guy just isn’t any good. Let’s face it, it takes quite a bit of skill to be a successful salesperson in this industry. Just as likely, the new sales guy is thrown into the fire with little training, guidance, or supervision from the owner. The owner figures, “Hey, how hard could it be? He just needs to get out there and make some presentations.” But, it’s not that easy. If the new sales guy was such a great self-starter, chances are he’d have his own CI business. As an employee, he needs supervision, and most owner/salespeople don’t have the time, skills, or cash to train a new salesperson.
So here’s what happens. If the new guy is on commission, he gives up in frustration after a year. If he’s on salary, he’s fired for underperforming. In any case, his presence is a distraction and expense to the company.
In the second scenario, the new sales guy is a superstar. He pulls in big business, makes big money, and has the ego to support it all. He starts treating the company like his own fiefdom, changing business processes, product mixes, and personnel to suit his needs. And when he doesn’t get his own way, he jumps up and down until he get what he wants. Or, he up and leaves the company either to start his own CI business or to park “his” business at a competitive operation. Either way, the immediate loss of sales is dangerous for the CI company.
The ride is exhilarating while he’s there, but the long-term impact on the business is dangerous.
There is another way to grow sales. Instead of hiring a salesperson, the owner could increase his support staff, and shed all segments of the selling process except the pure selling activities. By looking at the four segments of the selling process, and choosing to concentrate on the most important task–making the sale–the owner can increase the company’s revenue substantially.
The staffing requirements include hiring a dedicated project manager who creates proposals, hands them to the owner to be “sold,” then manages the project through completion. It means finding a person dedicated to lead generation to plan the architect gatherings and send literature to custom builders. It means having a third person in-house to help with sales administration.
In my experience, I’ve seen owner/salespeople capable of selling (that’s pure selling) up to $6m per year. I’ve seen project managers handle about $2m per year. Lead generation people can pull in about $3m worth of good leads. Sales administrators can handle about $2m worth of business. Given these numbers, a $1m CI business that wants to grow to the next level might consider the following full-time staff: one salesperson (the owner) one project manager, and one person handling both lead generation and sales. With this level of staffing in place, the owner can concentrate on the selling process and very likely double his sales. Of course, this “sales team” requires management and
supervision. This should be the role of the owner.
This is not to imply that hiring a salesperson is always a mistake. There are plenty of situations where a hired salesperson is the right move. For instance, it is the right move when the owner of a CI business is not a great salesperson and spends more time on another aspect of the business, like overall management. It also makes sense when the business has a retail presence. In these cases, extra salespeople are a must. Plus, there are cases when a CI business has such a broad range of offerings–selling entry-level systems all the way to million dollar automation jobs–that segmenting the offerings into price points, and finding appropriate salespeople for each segment makes sense. But in those cases where a CI company is owned by a salesperson, and the company focuses on a narrow price range, hiring sales support staff makes more sense than hiring additional salespeople.