My First Sales Person - A Very Expensive Lesson

 My First Sales Person - A Very Expensive Lesson

  - Lessons Learned, episode 64

 For some reason, business owners assume they need to hire a sales person. And maybe someday you’ll need one. But most of us, including myself, hired a sales person too soon. Here’s what I did and, more importantly, what I did wrong.

What I did: I researched the topic of small business sales. I even took several classes on it. Read some books. And then I put together my job description and posted an ad.

What I did right: Educating yourself is always good. Writing a job description before a job ad is good. The best thing I did was to set down very specific target sales and target dates for those sales.

Sounds wonderful, right?

With all that, I hired an  experienced sales pro who know something about technology but was certainly not an expert on managed services. That’s fine. Your sales person does not have to be a subject matter expert when they start.

What I did wrong: I am a good manager. That does not make me a good sales manager. That’s a very different skillset. And here’s why it matters. (This exact experience has been replicated with many business owners over the years.)

In the first month, the goal was come up to speed on what we do, who we serve, and the products and services we offered. In his spare time, the sales guy used this information to start building lists of prospects and dialing in our “ideal” client archetype.

The second month, we bought a good size list so we could do postal and email campaigns. The sales guy spent a lot of time cleaning these lists, preparing sales materials and getting everything “just right.” He did not spend time walking the business parks or calling prospects.

Then we put together printed materials, brochures, and great letters to go out. We did a bulk mailing. All of this needed to be finely tuned by the sales guy so it would be just right. He didn’t want to be held responsible if it wasn’t correct. That would eventually one of the reasons he didn’t make sales.

By the end of the third month he had still not made any sales.

We were getting some nibbles from the direct mail campaign, and appointments were set. I “went along” with him on these. We had a decent close rate, which is always the case once you sit across the table from someone who has invited you into their office. I like to say we made sales, but it was really me making the sales while he watched.

Month four: The sales person had not made any sales. But in month five I sent him out on his own. He knew our pitch. He knew our managed service bundles. He knew the kind of clients we want. And he knew how to put it all together. Still, he didn’t do any additional prospecting, he didn’t go door to door, and he didn’t make outbound calls.

By the end of month five we had exhausted the list we bought, added some names to our email list, and *I* had made some sales. Now, the funnel was empty. It felt very much like starting over, because the sales guy hadn’t done anything to cultivate more leads, fill the funnel, improve the offer, improve his pitch, and turn even a few cold leads into warm leads. He spent his time on tuning up the letters and the handouts. He didn’t go out and ask people for their business.

Finally, in month six I told him we had to pull the plug. I gave him a few weeks to sign one managed service deal. He didn’t and we parted ways.

All of this – 100% of this – was my fault. I was paying him a small “salary” plus commission. He could apparently get by on the meager guaranteed amount even though he was the lowest-paid person in the office. My commission was 25% of the profit (roughly 10% of the gross sale). So he could easily be the highest-paid person in the office if he just made sales.

Here’s why this was all my fault. Remember those targets and dates. We obviously missed all sales targets.

There were no negative consequences for missing the target (for not making sales). When I said I’m not a good sales manager, that’s the crux of it. Missing those targets took money directly out of my pocket.

A sales manager has to draw a very clear line and the consequences of missing a target should be clear and agreed to in advance. It doesn’t matter if you’re friends with the sales person or not. If they don’t make sales, they have to go somewhere else.

-- -- --

I had some other lessons with sales people. Ultimately, I did the math and realized that a small business owner needs to do all the sales until the company is making at least $1 million in top line revenue and can grow the company very fast.

Let’s say your new sales person need to earn $100,000. That’s fine if they’re paying for themselves. Well, if that’s about ten percent of the gross sales, they need to sell $1,000,000 worth of products and services in a year. That’s about $83,000 per month of new revenue. And it represents doubling the size of your business in one year!

All of that’s possible, of course, if you have the right plan in place.  But chances are excellent that you won’t be able to achieve that right away.

My lesson is that the owner has to be the only sales person for a very long time, and the primary sales person for a long time after that. And that’s actually a natural progression. Owners tend to move “up” into managing their companies and out of the actual service delivery. That gives them more time to warm up those leads and make those sales.

When a company grows large enough, hiring a dedicated sales person will make perfect sense. But you have to put hard targets in place and get rid of sales people who don’t perform up to spec.

This can be a very expensive lesson.

 

Feedback always welcome.

-- -- --

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page. 

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

 

Karl W. Palachuk is an executive coach and author of several books, including Managed Services in a Month and Relax Focus Succeed. He has built, bought, and sold several businesses, including two successful managed service businesses in Sacramento, CA. He advocates a holistic view of business, viewing the company as a system. You can find him at karlpalachuk.com or on LinkedIn. No artificial intelligence apps were used in the writing of this post.

:-)