The reason that sales and marketing are discussed at the beginning of this
book is very simple: Without sales, you won’t need any other advice about run-
ning a small business. And marketing (the next chapter) is the artillery that helps
sales advance more easily.
Many businesspeople do not consider sales to be a real profession—but
just ask any seasoned business executive who he or she values the most, and
the answer will be the people that bring home the sales. Hunters (people who
bring in the deals and make sales happen) and skinners (administrators and
those who fulfill sales agreements) are both important in an organization, but
sales trumps all.
Some who are starting a small business may believe that a sales force is not
needed. After all, family, friends, and business colleagues are impressed by your
venture and are promising big deals and sales. It’s not a good idea to depend
upon this. In today’s ultracompetitive environment, serious business volume will
only come through serious sales efforts generated in a professional manner.
We begin this chapter with a review of fundamental sales concepts and how
they apply to your small business. The discussion includes both sales qualifying
and the different stages in the sales process. Every small business should under-
stand how this cycle works for them so that sales resources can be applied to the
prospects most likely to buy.
The chapter also discusses various ways in which sales forces are structured
and managed, and the pros and cons of each. Here, the small business owner may
learn about and consider selling through a direct sales force, an inside sales group,
telemarketing efforts, agents, business partners, dealers and distributors, retail
(direct), and on-line. The issue of channel conflict is also reviewed, and some
advice is provided on selling to government as well as internationally.
There is nothing that can buoy the success of a small business more than an
effective sales force, so we provide some tips on how to hire and fire and weed and
seed until the best possible group is in place. Managing salespeople is different
than managing other employees. They require more maintenance, so we talk
about what to expect and how to deal with conflicts over commissions, recogni-
tion, and assigning accounts.
Selling your product or service is the most important part of any business; if
you find the magic-bullet solution to sales, just about everything else will be easy.
Most experienced pros would much rather manage an effective sales force sell-
ing a lousy product or service than the reverse. If you still don’t believe this, look
around at all the mediocre products on the shelves today that were brought to
dominance by the right marketing and sales strategies. (I could name more than
a few, but then I’d get into trouble!)
Further, there is a common misconception that because entrepreneurs know
their products or services intimately, they can sell them easily. Small business
owners must face up to the fact that they often are not the best people to gener-
ate revenues for the company. This chapter discusses ways of dealing with these
issues to get the most productive sales force possible given limited resources.
On the other hand, everyone is a salesperson at least some of the time. You
should decide on your role in the sales process and get good at it. Although sales
is a skill that is natural to some, it can be learned by others. Most small business
owners will not want to be involved in the front end of every deal, but maybe they
will participate in the later stages of the sales cycle. Decide where you come in
and get good at it. Learn from others the skills you will need, such as how to
make a good presentation or how to go for the close. Be honest with yourself if
help is needed, and recognize that sales is a complex profession that may be
difficult to master right away.
Throughout this chapter, think about how your products or services fit into
the market, and when and where it makes sense to buy. As discussed in Chapter
2, this critical determination is your Unique Selling Proposition, or USP. For a
small business, a well developed USP is all the more critical because most can
offer only a limited range of items. Buyers are smart and will eventually under-
stand where their best value lies, so sales efforts must target market niches where
your company is mostly likely to win. Otherwise, large amounts of time and
effort will be invested in deals where prospective customers end up saying, “Thanks
for the free education, but now that I have studied the market, I can see that
your product is good but another is my best value.”
Sales Qualifying
Professional salespeople are extremely careful about how they use their time.
There are only a few hours during the day to speak with potential new custom-
ers, and out of this must flow the sales to support an entire business. It is impor-
tant to know in advance the characteristics of likely customers and focus on
these opportunities. This is called sales qualifying.
Sales pros normally do this by constantly prospecting for new business and
immediately qualifying for:
Need. Is the customer buying what I am selling? Ask hard questions
to learn what the customer really needs. If he or she requires widgets
with blue buttons and yours have green buttons, then quickly move
on, no matter how nice they are.
Competition. To further understand need, ask about the competition.
Who is in the deal, how far along has the process gone, does the
prospect prefer a particular proposal, and why?
Decision-Maker. Are you dealing with someone who can sign an agree-
ment, or a water carrier who only takes information to the boss?
Worse yet, has the customer already made a decision but is dancing
around with you because the boss upstairs requires at least two bids?
(A frequent problem.)
Decision Process. How does the customer make buying decisions?
Who is involved, what are the criteria, and should you make addi-
tional proposals and presentations to others within this organization?
Budget. Learn what the customer expects to spend, and then make
sure he or she understands where your small business fits into the
market. If you sense that the customer cannot understand the value
of your product or service, then quickly move on.
Time Frame. Is the customer ready to buy soon, or just shopping
around? It’s usually a bad bet for a small business to romance buyers
and spend time educating them on the industry and market. Time is
better spent directing efforts toward clients who are ready to buy
now.
Other Criteria. Maybe the customer will buy only from local firms,
or big companies, or firms that sell widgets and 24/7 widget mainte-
nance plans. Ask a lot of questions to decide quickly if you are wast-
ing time.
In the end, most buyers are smart people and will make rational decisions.
Sales professionals who are on top of the qualifying game make the best use of
their time by weeding out time-wasting efforts and focusing on real prospects
who can actually buy the products and services of your small business.
Stages in the Sales Cycle
Every product or service has a sales cycle, beginning with some form of
introduction and ending with money in the bank. To properly allocate time and
to structure sales efforts, the sales cycle for each small business must be thor-
oughly understood.
For some products, such as electronic devices sold on the Internet, the pro-
cess is rather simple. The consumer “clicks around” with the following thoughts
in mind:
Research. I want a Home Theatre System, but I don’t know the
products; I want information.
Shopping. I know the features I’d like in my Home Theatre system,
and now I want to shop around to see who’s got the best deal and
the best reputation.
Buy. I know just what I want. I’m going back to buy and I hope
everything goes smoothly as I choose the products and enter my
credit card.
In this sales cycle, sellers do not want to speak directly with buyers because
margins are thin and this would not be feasible. Internet-savvy Web-retailers
direct potential customers to different pages of the e-store, depending upon the
stage of the sales cycle, as indicated by keywords entered during the shopping
process. For example, if a buyer uses a search engine to look for “Home Theatre
System,” a link is returned directing the shopper to a list of the company’s prod-
ucts and its place in the market. But if “Bose GS Series II 3·2·1 Home Theater
Progressive-Scan DVD/CD/MP3 Player” is entered, the shopper is sent right
into the buy-page for this specific product.
For certain B2B (business-to-business) IT services, however, the sales cycle is
dramatically different and much time is spent directly with the prospective cus-
tomer. I once worked with a firm that expected a sales cycle something like this:
Prospecting (many calls to find the right contacts within the IT
groups of potential customers).
Send letter and information.
Call for appointment.
First meeting. Objective: Qualify (as described above) and identify
others involved in the decision-making process.
Meet with internal technical staff to discuss customer needs.
Schedule a technical call to resolve issues and build the
relationship. Objective: Gather enough information to prepare a
proposal.
Meet with marketing and technical staffs and prepare proposal,
presentation, and pricing.
Sales presentation to customer (perhaps several presentations to
different groups).
Meet with customer to learn any objections.
Request internal legal staff to prepare documents.
Meet with customer to review documents.
Arrange for counsel from both companies to resolve legal issues.
Sign agreements to close the sale.
Not surprisingly, a normal sales cycle here was six to 12 months. And even
after the sale, the company had to deliver and install equipment, provide ser-
vices, get customer acceptance, send an invoice, and wait for payment. This could
easily require an additional six months. Fortunately, this firm understood the
process and was patient with its sales force.
Small businesses must outline a reasonable sales cycle to estimate the length
of time—and the overhead required—to close sales and generate revenues. Small
business owners must decide at which stages their involvement is the most pro-
ductive and stay away from the rest. Be careful, because many firms are overly
optimistic when planning sales and revenues.
Structuring Your Sales Force and Channels
With all of this in mind, it’s time to figure out the best way to sell your
products and services. Consider your ability to reach customers effectively and
think about expenses, loyalty, and other issues. Many arrangements are possible,
but most small businesses have limited resources and must choose only one or
two sales avenues. Perhaps the best hint here will be to take a look at your most
successful competitors. Chances are, the solution for your small business will be
similar to that adopted by the competition. The most popular arrangements are
described in the following section.
Direct Sales Force
Hiring and training an outside sales force is expensive and time-consuming.
In addition, managing salespeople is always a little more difficult than managing
other employees. They just require more maintenance. A direct sales force is
targeted to selling your products and services only. Hopefully, they will not switch
to a competitive product when the deal starts slipping away, which can be the
case with agents, field reps, business partners, dealers, and distributors. Be pre-
pared to design a commission system that is fair, competitive, clear, and legal in
all respects (for example, paying employees “commissions only” is not legal in
some states if the amount earned is less than the minimum wage).
A direct sales force is most needed in situations where long sales cycles are the
norm, as with rather sophisticated products and services. Of course, the best can-
didates for this are college-educated, serious, and career-oriented individuals. Be
prepared to pay a significant salary, because it never helps if a sales rep resigns
when big deals are in the pipeline. On the other hand, good management is re-
quired because some direct sales types may become a bit too comfortable with the
salary and lose their thirst for commissions. I have said to many salespeople:
“Your commissions alone must be at least $50,000 per year; if they are less, that
means you are losing money for the company.”
Finally, great salespeople are oriented toward the near-term. If your prod-
ucts or services are not yet deliverable or competitive, don’t expect customers or
salespeople to wait around.
Telemarketing
A telemarketing staff makes outbound sales calls to potential business (not
consumer) customers. Telemarketers are a special breed, and I have a lot of
respect for them. This is a profession within a profession; not many people can
take the rejections resulting from 50 to 100 calls per day. Moreover, telemarketers
often work for $8 to $20 per hour, which is relatively low. But, as always, you get
what you pay for, so don’t expect too much from those at the low end of this
range. Plan on paying a lot more in commissions to those who produce.
Telemarketing efforts must be directed toward products and services with a
very short sales cycle. Many expect to close sales on the very first call to a
potential customer and expect commissions by the end of the week. If your
small business deals with longer sales cycles, consider paying a flat commission
to a telemarketer for setting up an appointment, and then assign the deal to
someone else. The telemarketer gets paid regardless of what happens after-
ward, since she has done her job and cannot control the situation once the pros-
pect is reassigned.
Recruiting telemarketing people is difficult. My experience is that about 50
percent never show up for the first interview. Others will complete a training
program and then quit without notice. Many have alternate lifestyles, and their
real life lies outside your small business. As an example, I once worked with a
middle-aged man who arrived at my small business and called like a demon, and
then went home to write movie scripts. He was polite, but he clearly told me that
he had no interest in the products we sold. He was only in this for the money but
would work hard on my clock. The situation worked because I respected his
position.
For this reason, it is unlikely that your small business will get very far with
just one telemarketer. There is too much turnover. Most successful telemarketing
operations continually bring in groups of new recruits, train them, get them on
the phones, and expect that half will quit within 45 days.
This situation can be mitigated with a pleasant, professional, and modern
work environment (no smoke-filled boiler rooms); opportunities to be promoted
to other positions; lots of perks and unannounced rewards (“We’re giving a $100
bill at the end of the day to whomever sets the most appointments”); a moti-
vated, upbeat, and energetic telemarketing manager; fringe benefits such as medi-
cal insurance; and respect from management. Of course, a hot call list resulting
in lots of deals and commissions raises the morale for everyone.
Inside Sales
In contrast to a telemarketing staff, an inside sales group handles incoming
telephone calls to book sales from both business and consumer-type customers.
In smaller firms, they also handle customer service. Of course, incoming calls
need to be generated through other marketing efforts, or your small business
will be paying a lot of money to salespeople who only sit and wait for the phone
to ring. Build into your budget sufficient advertising funds (perhaps through the
marketing alternatives discussed in Chapter 4 or through Internet marketing, as
discussed in Chapter 5).
Inside sales people are usually paid a higher hourly rate than telemarketers
but make less overall because commissions are lower. There is also less turn-
over and less maintenance. Most inside sales people want to learn about a
particular industry and are more career-oriented than telemarketers. There-
fore, it pays to invest more in training. Unlike telemarketers, inside sales people
are often encouraged to make their calls as short as possible to book deals and
free up lines for the next incoming customer. Also, they must be articulate as
well as cool under pressure and in the face of unpleasant customers. Many
inside sales people these days are college-educated and at the entry-level stage
of their careers—but don’t discount moms, seniors, and others who are reenter-
ing the workforce.
Unlike telemarketers, inside sales people do not need to be hired in packs
but can be recruited as needed, because longevity is preferred. Once again, how-
ever, morale, productivity, and longevity are enhanced by a pleasant, profes-
sional, and modern work environment.
Finally, when things get slow, don’t expect to turn your inside
sales force into
telemarketers. The personality types are not the same, and turnover will soon
result.
Agents and Field Reps
Agents and field representatives (referred to as agent/reps) are not employees
of your company but enter into a relationship where they receive the right to sell
the products and services of your small business in exchange for commissions.
This is desirable in at least two situations:
1. Your small business cannot yet afford a direct sales force.
2. Your products and services require sophisticated representation in
distant geographical areas.
Locating agent/reps may be a bit difficult. This process may be approached
through Internet channels (such as Monster.com, CareerPath.com, DICE.com,
and HotJobs.com), through contacts developed at trade shows and industry
events, and through trade publications. Afterward, the process should be similar
to that for recruiting any other employee (discussed in Chapter 6).
The agent/rep agreement normally requires no financial commitment on the
part of your small business, but this can be a double-edged sword. On the one
hand, these representatives must produce business to earn compensation. But
on the other hand, loyalty can be an issue because agent/reps flow in the direc-
tion of the easiest money. If a potential customer tilts toward a competitive
product after your small business has invested lots of time and resources into a
deal, there is often nothing to stop the agent/rep from switching over to the
competition.
Another problem is that some agent/reps load themselves up with far more
products than they can ever sell. Their thinking may be: “I understand and sell
security software for a living, but just in case an important customer requests a
relational database product, I will have something to offer.” For that reason,
many small businesses require that agent/reps complete a training course on the
product and then enter into an agreement that can be terminated if sufficient
business is not generated. Some even demand fees for the training course to
make sure the agent/rep is serious.
Note also that your small business has little control over non-employees. It is
possible that agent/reps may make unrealistic promises and commitments and
expect the management of your small business to make good on them. Loose-
cannon types may also use your company name and logo in ways that bring harm
to your small business. That is why many agreements allowing non-employee
sales representation require that the agent/rep not represent himself as an em-
ployee of your small business. Nor may she make commitments to anyone re-
garding your company. These must all come from you. Many also require that
the agent/rep indemnify the small business against associated problems.
Another issue concerns the legal status of the agreement. Small businesses
must take care that the agreement emphatically states that the agent/rep is not
an employee. Most agreements are laced with several special paragraphs on this
subject, such as the following:
Since Agent/Rep is an independent agent to Small Business, Inc.,
and not an employee of Small Business, Inc., Agent/Rep and not
Small Business, Inc., will be responsible for paying and withholding
all federal, state, local, and FICA withholding and income taxes, in-
cluding Worker’s Compensation insurance that shall become due from
Agent/Rep based on payments made by Small Business, Inc., to
Agent/Rep under this agreement. Agent/Rep further agrees to pro-
vide Small Business, Inc., with proof of insurance if requested by
Small Business, Inc., and to cooperate with defending Small Busi-
ness, Inc., and to indemnify Small Business, Inc., from any claim or
assessment made against Small Business, Inc.. by any federal, state,
or local taxing authority or Worker’s Compensation agency based
on payments made by Small Business, Inc., to Agent/Rep under
this agreement. Total compensation paid shall be reported via IRS
Form 1099.
The Big Business Partner Deal
That Wasn’t
A friend of mine had a software company, “TDX
Optimizer,” that specialized in a niche market.
He had a great product, a clear-cut Unique
Selling Proposition, and the deals were com-
ing in from corporate data centers all over. His
only competition was from a multinational com-
puter products and services company, we’ll
call MultiNationalMegabyte, or MNM, which of-
fered an inferior product.
At an MNM-sponsored trade show, TDX’s
president excitedly explained to me how he
was on the verge of closing a deal through
which MNM’s sales reps from all over the
world would now carry the TDX product. It
seemed to make sense because customers
were buying it anyway, and everyone felt it was
a solid offering.
My friend thought he had MNM by the tail,
and explained that he would sign the big deal
tomorrow. There was just one catch: TDX could
not sell to any current MNM customers (about
50 percent of the TDX market) for two years.
I was at the same trade show a year later
and saw the president again. I couldn’t wait
to ask about the big deal. It didn’t work out as
he had expected. In fact, almost nothing was
sold. As it turned out, MNM’s reps already sold
over 1,000 different products and services,
and TDX was not properly promoted to the
hundreds of MNM reps all over the world. It
just got lost in the clutter. Besides, with a typi-
cal sales price of $50,000 to $100,000, TDX
licenses would be an afterthought in the big
deals where MNM’s systems sold for upwards
of $10 million.
But don’t worry about the big corporate
users that needed an optimizer product—MNM
sold plenty of licenses for their own second-
rate product to these customers.
I didn’t ask my friend but wondered: Was
it really an accident that the popular TDX prod-
uct was put on ice, while MNM’s inferior
optimizer now ruled the market?
The employee or contrac-
tor issue is important these
days, and is further discussed
in Chapter 6.
On a more positive note,
agent/reps may have relation-
ships with contacts that your
small business will not get to
for years. And if you’ve got a
good product or service, then
well-connected, knowledge-
able, and respected agent/reps
may quickly generate deals
that would otherwise be un-
reachable through other sales
means.
Business Partners
The business partner rela-
tionship is similar to the agent/
reps alternative, but the agree-
ment is business-to-business.
In this section, we are mostly
interested in the arrangement
whereby a larger firms sells the
products and services of your
small business.
In this case, the small busi-
ness usually has less control,
in the hopes that the larger
player will add its products and
services to the Bigger Business
catalog of offerings, and direct
its much larger sales force to
sell in obscene quantities.
This alternative should be
played out only when simulta-
neously attempting to sell
through other means. As al-
ways, success brings success,
and if a potential business part-
ner sees that your small busi-
ness is already doing just fine,
it will make the deal all the better. On the other hand, if your product is still in
development or not getting industry visibility, don’t expect much excitement from
potential business partners.
A business partner relationship normally involves the upper management of
both parties, and other parts of the sales organizations are typically involved
only after the deal closes. The sales cycle may be very long, but the upside can
sometimes bring a small business into the big leagues.
Distributors and Dealers
Depending upon the product, dealers and distributors may be an integral
part of your sales model. Distributors and dealers typically carry a wide range of
products, including the competition, and have market reach not available to small
businesses. Customers depend upon this extension of the sales channel to pro-
vide a robust range of products quickly and at low prices. The best way to deter-
mine if this alternative should be included in your sales efforts is to look at
successful competitors. How do they sell? The answer for you is probably about
the same.
The following can be expected when selling through distributors and dealers:
Loyalty. Don’t be offended, but most distributors and dealers will be happy
to add your product to their catalogs: If it sells, it sells; and if it doesn’t, it
doesn’t. Don’t expect loyalty or hard selling efforts from distributors and
dealers.
Product Knowledge. Distributors normally utilize an inside sales force to
sell their offerings; dealers may actually have face-to-face contact with cus-
tomers. In both cases, sales efforts flow to the easiest money. If the distribu-
tors and dealers are familiar with competitive products, adding your offerings
to their knowledge base may be relatively easy. Expect to do a lot of promo-
tion to gain visibility, or competitive products may be offered instead of yours.
Promotion. If your small business expects serious revenues through distribu-
tors, expect to spend heavily to push and pull products through these chan-
nels, as described below.
Pulling. Pulling is when your small business advertises and otherwise promotes
products directly to consumers, who then buy through dealers and distribu-
tors. Always be on the lookout for opportunities to pull products through these
channels, because trading partners expect vendors to make their phones ring.
Pushing. In some cases, small businesses should consider hiring distributor
reps who push products through D and D channels by visiting new and exist-
ing contacts frequently to announce new products and changes, for training,
to make sure catalogs and databases are current, to resolve administrative
issues, to promote special sales incentive programs, or just to take everyone
to lunch. An experienced distributor rep with lots of contacts may quickly
generate some big revenues.
Volume Discounts. This is easy. Set up a schedule where D and D sellers get
discounts as volume increases, such as “If shipments exceed $250,000, Seller
shall receive a 1 percent discount on future purchases; if shipments exceed
$500,000, then 2 percent...” The program must be promoted, or some sellers
will receive discounts without knowing it.
Co-op Marketing Programs. Many small businesses offer special programs
to dealers and distributors where extra discounts are given to sellers who
send approved mailings to customers or place approved print ads. For ex-
ample, one co-op deal may allow that
If dealers print their name in the designated area of this four-color
brochure and send it to recent customers, our small business will
pay up to $2,000 by offering an extra 4 percent discount on all new
products purchased for the next 30 days.
When this program is offered, be sure to have lots of marketing materials
printed and ready to ship the same day, especially the four-color brochure.
Retail
Many small businesses begin as retail operations, where products are sold
out of a storefront location. The pros and cons of such operations are reviewed
here as a checklist for new businesses and for small businesses who currently sell
through other channels and are contemplating retail:
Expensive Overhead. Retail stores are relatively expensive, because small
business owners must spend heavily on higher rent, design, furniture and
fixtures, computerized point-of-sale systems, back-office computer systems,
and a great location. It’s often not feasible to keep significant inventory at
retail outlets, so extra warehouse space may also be leased. Further, a solid,
well-thought-out business plan must be in place because most leases require
a three- to five-year commitment.
Better Prices. Your products should fetch the highest possible revenues in a
retail location. If other channels are currently in use—such as dealers, dis-
tributors, agents, or the Internet—check out the local retail competition,
note their prices, and then set yours to about the same for walk-in custom-
ers. Expect some static when customers realize that the same product is
available from your small business at a better price through other channels.
Recruiting and Compensation. Cashiers in retail locations often double as
sales representatives if they have a good knowledge of your products and
perhaps those of the competition. It’s relatively inexpensive and easy to hire
retail salespeople, and commissions should be considered if they can affect
customer purchases. Check-out clerks, for example, don’t receive commis-
sions because there is no customer contact during the buying process. How-
ever, commissions might be considered for representatives of a light-materials
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