An Effective and Economical Solution

As the leaders in corporate America react to the constant pressure for greater profit and increased shareholder equity expectations, along with the threat of being outmaneuvered by more nimble and less-leveraged competitors, outsourcing has quickly become a necessary business strategy. To better focus on their core competencies, more companies recognize outsourcing as an effective and economical way to perform many functions—not just security and payroll, but even more complex activities such as human resources, purchasing and more recently the outside sales function are being strategically outsourced. The trend is visible today in mega-billion dollar worldwide companies like CISCO, AT&T or GE, as well as in start-ups and companies with more limited resources. Outsourced professional field sales people who are not on the company payroll; who don't require a company-paid, high-cost, multi-level management structure; and who don't get paid until they actually sell something, are now more than ever becoming the choice of companies that up to now have believed that the only way to sell was through a very expensive, fixed cost, factory-direct sales force.

18 Benefits of Outsourcing

Performance-based Compensation

The surge toward outsourcing the internal, factory-direct sales function to external, independent sales professionals has many roots. It is a fact that there are many companies moving in this direction for many different reasons. One of the main driving factors is the performance-based compensation model that, by definition, is alive and well within outsourced sales organizations. There is no guaranteed base pay. Zero results equal zero income. Performance-based compensation may be a buzzword today in the executive ranks, but it has been an ongoing reality in the world of outsourced sales for decades, if not centuries. Sell more and make more. Nothing paid unless performance is achieved.

Economics of Outsourcing Field Sales

Ask any outsourced sales rep, and you'll quickly learn that one of the occupational hazards of the outsourced sales model lies in being perceived as being too successful. A typical scenario can be painted as the revenue in an outsourced sales organization grows from a couple hundred thousand to a few million dollars over a couple years. The company's sales manager pulls out the calculator and begins to calculate what he thinks is the income of the outsourced sales rep. The erroneous conclusion is reached that with the amount of money the outsourced sales organization is being paid, it would be more advantageous to hire and support a factory-direct sales person instead; someone dedicated to the company full-time who will further grow the revenue.

Good arithmetic. Faulty reasoning. The manager's calculation ignores many costs borne by the outsourced sales representative and his company. Things like medical, dental, administrative, legal, travel, phones, computers, website, entertainment and facilities costs that will have to be added to the company's expense budget, both in the territory and the home office. Also often overlooked is the likelihood that the outsourced sales team, with its multiple sales personnel and regional systems, will grow the territory faster than can a single direct sales individual.

What are the real costs? The outsourced sales rep not only finances the sale (usually not receiving commission until after the goods have been shipped), but the sales rep's commission dollars also cover the cost of recruiting, training, automation, order entry, and more. These expenses typically add half again to the factory-direct salary costs. The outsourced sales representative takes on a much broader role than sales alone, whether it is editing, administering or expediting orders, staffing a trade show booth, or handling a customer return. Eliminating the manufacturer's exposures on a variety of legal fronts is another benefit to outsourcing sales—workmen's compensation, sexual harassment, and ADA lawsuits, state and local regulations, to name a few of the most obvious.

Anecdotal evidence from countless outsourced sales representatives who have experienced a company decision to go factory-direct and pull sales back in-house suggests that the real cost lies in the business that goes away. One outsourced sales representative tells of being asked to "take back a product line" after it had been moved in-house; and after fourteen months of factory-direct sales, there was only $400,000 of business coming in from a territory that had been built to over $5 million by the outsourced sales rep! In this instance, by moving back to the outsourced sales model the company determined it was more important to save customers and save revenue than to save face. Not only were all the outsourced sales representatives invited back, but the decision was made that factory-direct sales in the territories that had previously been direct were now outsourced too. The result was an ever increasing revenue stream that is now almost back to where it was before the "factory-direct" experiment.

Lower Overhead and Standardized Sales Costs

Companies that used to employ only factory-direct, high cost, in-house sales organizations are now looking to independent, cost-effective, outsourced, sales representatives as a practical approach to downsize headcount, manage expenses and get more "bang for the buck".

The opportunity to lower overhead and standardize sales costs has convinced many companies to utilize outsourced sales representatives even when the company's sales volume is sufficient to cover the expense of a factory-direct, dedicated sales force. Through outsourcing, companies have found that they can cost-effectively deploy a team of many people across all of North America instead of a being bound by the physical limitations of a couple expensive, factory-direct sales people. As a result, the company gains a greater sales coverage for fewer dollars.

Business leaders are also choosing to outsource their field sales organizations as a means to diversify into new markets and create specialized distribution channels. The outsourced sales model allows a company to explore new markets and new territories without the major financial commitment involved in rebuilding, retraining, and retooling their own factory-direct, niche-market sales forces. Outsourcing field sales to establish new markets or new territories allows a company to expand its business through the outsourced sales channel while also maintaining a focus on its core business. The outsourced sales channel helps minimize the risk of distracting a company's factory-direct sales force from what they are really good at—protecting the company "jewels".

The sophisticated outsourced sales representative is professional, multi-faceted, technologically adept, and efficient. And, as the outsourced sales rep will be quick to remind everyone, he buys his own tickets and pays his own expenses.

Contact us today to learn more about the benefits of trusting your sales efforts to professional, independent, outsourced sales representatives.