Friday, May 17, 2013

Will You Maximize Value with a Superstar Sales Rep?

Do you need a superstar sales rep to build your business for a successful transition?

Actually, you should avoid the trap of relying on one superstar sales rep if you want to maximize the value of your business.  To maximize value, a seller must be confident that the company will continue to generate sales after you are gone.  Many business owners think that hiring one superstar salesperson to replace themselves as a rainmaker is the answer.  Doing so, however, may simply trade a dependence on you to dependence on a sales rep.  Your business will be no more salable as a result.

According to the researchers at the "Sellability Score", businesses that could easily replace their top salesperson were more than twice as likely to get an offer to buy their business than those companies who are overly reliant on a single salesperson. [1]

To maximize value you need a sales team – not just a single salesperson.  Hiring a single sales rep will only keep your business reliant on one person.  How do you build an entire sales team?  Here are four tips for building a sales team on a budget:

1.  Start charging up front

Sales reps can be expensive to find and train.  In order to avoid running out of cash before they are fully ramped up, consider charging some or all of your fees up front by way of retainer, deposit or advance.  If you stagger your billing, ask for a larger portion up front.  If half your customers agree to the larger deposit, you’ll have more cash to build your sales team.

If possible, consider a subscription or service contract model as most people are used to paying for subscriptions up front.  If you can lock customers into an annual contract try offering an incentive for full payment in advance.  For example, if you charge $1,000/month for a maintenance contract but offered clients an option to pay $10,000/year up front, you would have $10,000 in the bank for each contract sold.  If a new sale rep could sell two contracts per month, you should be able to cover their monthly costs in no time.

2.  Carve territory into small chunks
Sales territory is an asset which is easy to offer to sales reps but hard to take back.  You should carve up your market into sales territories that provide enough opportunity for each sales rep to make money.  Don’t be afraid to leave a territory unfilled for years.  Avoid the temptation to allocate all sales territories to existing sales reps as it will become impossible to take back certain territories when you’re ready to hire a new sales rep.

3.  Hire a second rep as quickly as possible

If possible, start by hiring two sales people, not just one.  Sales people thrive on competition, and in order to have a salable company, you need to be able to demonstrate to a buyer that your sales are driven by a sales team and not just one high performing salesperson.  If you’re charging up front or on a subscription model, you should be able to quickly get to the point where each sales rep is at least covering their costs to you.

4.  Think long-term
Good salespeople are are difficult and expensive to find.  Once you have a good salesperson, the benefits associated with investing in retaining that salesperson more than outweigh the costs associated with finding and training a replacement.  Two things to consider in this regard include: employment contracts with appropriate clauses (e.g. non-competes); and compensation packages that provide long-term financial incentives to stay with the company (i.e. more than an annual bonus).  HR consulting firms and employment lawyers can assist in this regard.

Replacing yourself as the company’s rainmaker is the right strategy if you want to maximize the value of your business; but avoid trading a dependency on you to dependence on one superstar sales rep.  Focus on hiring and retaining a quality sales team and watch your company and its value grow exponentially.
[1] The Sellability Score is an online questionnaire that allows a business owner to assess the "sellability" of the company. If this is of interest, you can find out your company’s Sellability Score:

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