Getting the Right Sales Model is Critical for Small to Mid-size Businesses
According to industry reports…
More than 41% of all small to mid-sized U.S. businesses reported that their sales and marketing efforts fell short of achieving their Q1 revenue goals.
“This is nothing new.” says Larry Caretsky, president of CRM solution provider Commence Corporation. “I think the biggest challenge facing small to mid-size companies today is dealing with the evolution of how products and services are sold today. The Internet has created an on-demand mentality for all kinds of products and services – products that were once sold by professional sales people, either face to face or via the telephone. While the bigger guys have adapted to this new sales paradigm, many small to mid-size companies are trapped in old school thinking. They tend to stay with what they have done for years even though it is no longer working.”
Let’s look at an example.
THE GOAL The ‘NewCo’ company sells sales management software and consulting services to mid-market companies via a direct sales team. They have an average sales goal of $20,000 to $30,000 per customer – not huge but enough to cover the cost of sales salaries, commissions, and overhead and still make a profit.
THE CHALLENGE Over the past 5-7 years, the industry has changed substantially and has become even more competitive. Web based programs can be deployed via a cloud-computing environment, and require no hardware or software. The competition’s software is available over the internet at a fraction of the cost of NewCo’s original sales software.
THE STRATEGY NewCo responds with a new web based offering of their own at a competitive price, and retains their highly skilled sales team as their only sales channel.
THE RESULTS While they are winning sales, they are losing money on every one. Why? Because their cost per sale is simply too high. Competitors are selling their products over the internet using lower cost telesales representatives. If NewCo doesn’t find a way to reduce costs and improve their efficiency they will likely be out of business.
There are three selling models to consider (excluding retails sales).
- Direct Sales – a well-trained in-house sales team employed by you
- Channel Sales – third party companies that sell your product or service based on a percentage of revenue or business they close
- Internet Sales – low cost telesales staff that simply process orders or assist customers with the order process
Of course, you can have a combination of the above. Your decision with regard to which one(s) are most appropriate for your business will be based on the overall cost of your product, the cost associated with selling the product (i.e. , salaries and commissions) and your margin or profitability on each sale.
In NewCo’s case, it is clear that relying solely on direct sales will no longer work for their business, but perhaps adding a telesales team with some regional channel partners will.
The world has changed, industries change and you have to be willing to change with it. It’s that simple.
Meeting your quarterly or annual marketing and sales objectives is not as simple as just adapting to the right sales paradigm. This is critical, but the next step in the road to success has to do with implementing the proper sales structure and process. I will discuss this in part two of this whitepaper – “Using CRM to Leverage Sales”.
About the author:
Larry Caretsky is president of Commence Corporation a leading provider of online CRM software. Caretsky has more than 30 years of experience in the client management software industry and has written numerous whitepapers on the subject along with an eBook “Practices That Pay”. He leads a consulting team that assists small to mid-size businesses implement best practices for sales execution and sales performance.
Image “Money With Magnifying Glass” courtesy of Sujin Jetkasettakorn at FreeDigitalPhotos.net