Salesperson effectiveness directly influences your company’s profit. But there is no one-size-fits-all approach to building a sales force. Every industry, competitive environment, and company is unique. Entrepreneurs must consider their own situation when making decisions on whom to hire and how to organize, prepare, and motivate sales employees.
Although every sales force is unique, the sales management structure will naturally evolve over time as the company’s scope of operations increases and its management structure matures.
The following are the general stages that naturally materialize over time, along with tips on how to ensure your sales effort is effective.
Stage 1: Entrepreneur as salesperson
Early-stage entrepreneurs tend to take on many roles. But nobody is great at everything. If the entrepreneur is a natural salesperson, the “owner as salesperson” system will work well. But if the entrepreneur’s strengths fit best with other areas of the business, such as production or finance, the sales process is likely to suffer and to hold back growth; the sales effort is an uncoordinated inconvenience. The company approaches business development by relying on the company’s reputation to draw in work.
Stage 2: Entrepreneur as sales manager
At some point the owner decides to hire a salesperson, usually because the owner is too busy to do the work themselves or realizes the value of having someone with a different skill set.
The first challenge in this stage is that the entrepreneur becomes a sales manager. Sales management is extremely complex. It involves designing the sales management structure (i.e., territories, compensation structure, job descriptions, training programs, forecasting and reporting processes, and performance evaluation systems). It also involves coaching and mentoring salespeople to improve performance. Effective sales managers are great leaders. The sales manager is responsible for getting the greatest performance out of each salesperson by helping them develop the knowledge and skills required to do their jobs.
Some sales management decisions are straightforward when you have only one sales employee. For example, there is only one territory. The key is to understand what is important to your employee’s success and to make decisions that improve employee effectiveness. If training is important, will this include both technical training on the product and training on the process of personal selling? Who will deliver the training, when, and at what cost? Will this be an ongoing process or a one-time event?
The second challenge of Stage 2 is that hiring a first sales employee is difficult, because the entrepreneur likely has no experience recruiting salespeople and does not know what skills and experience to look for. Don’t settle for people at the bottom of the pack. You need a quality hire to have any chance of success.
Stage 3: Process changes drive performance
With some success in place, the owner begins to realize that the sales process can be adjusted to be more effective. Often the natural changes are to put a proper customer relationship management system in place, establish training programs for salespeople, and develop a reporting structure that provides key information to management.
These changes have a dramatic effect on the salespeople’s effectiveness and are the first few stages toward putting a proper sales management structure in place. However, the changes are often made piecemeal rather than being coordinated toward a common goal. Eventually the entrepreneur realizes that the sales management structure has a direct impact on performance. At this point decisions are coordinated in areas such as the nature of the sales positions, allocation of territories, and budgeting.
Usually at this stage the entrepreneur realizes that marketing has a role in supporting the sales effort. When it’s coordinated, marketing draws in leads for salespeople and makes the sales effort more effective.
Stage 4: The sales force expands
The stage related to process improvements to the sales management structure never really stops – adjustments are typically made to account for evolving company priorities and a shifting competitive landscape. However, as the company scales up, the sales management process must occasionally adjust sales positions and also the way territories are allocated. At the most basic level, the company must decide on the mix of inside salespeople (typically taking calls, preparing proposals, and processing orders) and outside salespeople (visiting potential customers to drum up business). These positions require different skills and compensation structures. As the company grows and the sales force matures, positions become specialized, so people can focus on what they do best.
Stage 5: A sales manager joins the team
A sales force is only as good as its management. The right time to hire a sales manager is different for each company. Generally, it is when the entrepreneur no longer has time to manage the salespeople or lacks the skill to do so.
When hiring a sales manager, best practice is to avoid hiring your best salesperson. A sales manager needs different skills than a salesperson. The manager’s purpose is to lead and improve the competency of the salespeople. It’s a complex role. A more sophisticated sales manager will also have the skills to design the sales force management structure, as mentioned above.
Stage 5 can be a difficult period of change. It is common for some longer-serving salespeople to leave when a sales manager joins the organizational chart. Some salespeople will view the manager as an intrusive, unnecessary micromanager. Generally, the higher performers understand the value of a manager and see that the benefit to them is improved performance, which leads to higher compensation.
Stage 6: Territory managers join the team
When a sales force is ready to scale up significantly, the next step is usually to hire territory managers, who have responsibility for salespeople in a certain territory. Typically, these are competent people who supervise salespeople and report to a centralized sales manager. This position typically is appropriate when salespeople are not centralized in one office.
The sales force is large enough at this stage that it is typical to refine decisions around job specialization, territory allocation, and compensation structure.
As an entrepreneur, you need to understand where your business is in the sales cycle. A sales management structure must evolve over time and what is ideal for your company at $10 million in revenue simply won’t work for when you reach $50 million. Make sales management decisions that are right for your business and you can expect to see a direct impact on the bottom line.
First published in the March 2018 edition of The Business Advisor.