Hiring Salespeople

Hiring your first salesperson can cause long-term damage to your business if it isn't ready to grow. Here are the pitfalls you should consider before increasing your sales staff.

Every new business goes through certain critical transitions, and a particularly important one begins the day you decide you need to have another salesperson in addition to yourself. Bringing on clerical help or frontline people is a different story. You do it because you have to--because you can't handle the work on your own. But when you hire a salesperson, you're making a decision to grow, and how you go about it can have long-term consequences for you and your company.

There are three major challenges you face when you hire a salesperson, particularly the first one. To begin with, you need to make sure that he or she is going to have enough time to succeed. How much time is enough varies from business to business, depending partly on the selling cycle. In my storage business, for example, it typically takes two years to close a sale. In other businesses, the selling period can be just a few weeks.

Even in businesses with a short cycle, you need to give new salespeople time to adjust to the culture, learn the products, develop a sales base, and so on. You can't expect them to start making good sales as soon as they walk through the door. It's generally wise to assume that new salespeople won't make any sales during the first year. Why? Because you won't be able to judge their performance objectively if you're counting on their sales to make ends meet.

When you hire a salesperson, you're making an investment, and you have a right to expect a return on the investment in a reasonable amount of time. Let's say the person costs you $45,000 in salary and benefits, plus another $5,000 for other expenses (telephone, travel, etc.). Suppose that your average gross margin is 40%. The salesperson would have to bring in $125,000 in sales at that margin ($125,000 x 40% = $50,000) just to cover what you've spent on him or her in the first year.

That's a tough concept for many people to understand. Most companies don't even try to teach it. But you'll have continual problems with your salespeople if they don't understand how the business works and what you're counting on them to contribute. They'll make bad sales. They won't follow the rules. They'll constantly complain about being unappreciated and underpaid because they don't know what's really going on. Education is the only way to solve these problems. You need to change the way your salespeople think. You need a process that teaches them the business while they do their jobs.

After you solve the education issues, there comes another one: how to motivate your salespeople. Instead of paying them commissions, move the best ones to straight salary. With a salary, salespeople work as members of a team. When you put them on commission, you're giving them an incentive to follow individual agendas.

From: Inc. Magazine, Dec 1998 | By: Norm Brodsky

Norm Brodsky is a veteran entrepreneur whose six businesses include an Inc. 100 company and a three-time Inc. 500 company. This column was coauthored by Bo Burlingham.


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