Customer Results has created contract sales arrangements with a number of companies over the years (especially in our previous incarnation between 2001 and 2004). We are seeing a growing level of interest in this model as the recession starts to pass us by and we enter 2012. The following extract comes from a Q&A this morning:
Moderator – What Are The Reasons You See A Growing Interest In Contract / Fractional / Retained Sales Professionals
Graham Clark – Customer Results Partner
There are 6 key trends we see as we are entering 2012:
Great performing sales people are always hard to find – Accenture’s Sales Performance Report for 2010 stated ~50% of enterprise sales personnel fail to hit quota. Plus enterprise sales people achieving 125% or more of quota comprise less than 20% of sales people. I believe this performance metric has been even worse in 2011. For growing companies and new market entrants these star performers are even more important and even harder to secure meaning the failure rates are much higher.
Great sales people are expensive – When you consider fully loaded cost a high performing complex solution sale centric enterprise sales person targeted to deliver $1m-$2m in quota costs $190,125 plus incentives and travel and expenses which equates to ~$15,843 per month (plus incentives and expenses) based on:
- $125k base salary
- 15% for benefits (includes 7% of salary for social security and Medicare taxes, 4% in 401k retirement match, $10k in annual healthcare costs),
- 15% to cover non selling time including vacation, sick time and time spent on non productive enterprise activities
- Long term annual “hiring and churn” factor of17% (“Selling Power” magazine recently quoted the average enterprise sales person tenure as 18 months. With an industry standard 2 months of annual loaded base compensation paid for internal or external recruiting professionals and interview costs and 1 month of sales time dedicated to account transition).
Corporate overheads add another ~35% which drives a true annual cost of $256,668 and a monthly cost of $21,389. Performance incentives add a typical 5%-15% of revenue depending on product or service recognition and market presence.
Fractional Or Part Time Sales Resources Often Make Sense Especially For New Market Or Product Launch But Are Unavailable On An Employment Basis – Especially when a new company is launching in a market or is launching a new product the sales requirement may not be full-time, at least initially. However few high performing sales people will work part-time unless some special arrangement exists (like independently wealthy sales people or equity in the company)
The Contract Sales Model Is Used Extensively In Every Other Industry – Often referred to as “manufacturer’s reps” the contract sales agent model is used extensively in almost every industry except enterprise software and services. Systems Integrators and Consultants tend to perform this role in enterprise software and services because there has been so much custom development work required historically but as solutions become ever more packaged and configurable that is changing and we are coming into line with other industries.
The Contract Model Is Proven In Every Other Role In Enterprise Software And Services And Its Time Has Come In Sales / Business Development / Account Management – It is odd that if you want a strategist, architect, analyst, coder, project manager or anything else contract or part-time resources are a standard consideration. But not for sales or account managers, this doesn’t happen and there is no reason why it shouldn’t.
Contractual Protection Is Greater For Company To Company Agreements In The USA Than Employment Agreements – USA is rather unique in developed economies in that in most US States the relationship between employees and employers is very weak in terms of post employment non-compete and intellectual property agreements. The USA in general believes in “At Will, Right To Work” flexibility. Legal protection of your goto market strategy, customer relationships and intellectual property are more easily enforced in a business contract arrangement than in a company to employee arrangement, something many non USA firms do not realize.
Moderator –So Where Do Companies Find These Contract Sales Professionals
Graham Clark – Customer Results Partner
It is interesting that there are not many sources for this today and that is a gap that Customer Results is looking to help fill. There are a growing number of firms providing fractional executive sales leadership at the VP and above level most clearly demonstrated by Tech CXO, that operates here in Georgia, but no-one seems to be focused on producing sales professionals.
Moderator –And What Should People Expect To Pay
Graham Clark – Customer Results Partner
I cannot speak for others but Customer Results has a retained fee model that starts at $20,000 per month plus incentives and travel and entertainment expenses for a full-time retained enterprise software and services professional with a one quarter commitment and ranges to $15,000 per month if an annual commitment is given. These fees can be reduced by 50% when a half-time sales commitment is required.
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