Comparisons

The In-house sales vs Outsource sales dilemma

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Most companies that inquire about our services have already decided to outsource those functions and seek a partner that offers the best fit for their specific challenges. Every so often, however, we encounter a company actively struggling with the in house vs outsource dilemma.

Inside sales teams always have potential, but…

Indeed, the ability to develop “inside sales” resources in the house offers excellent potential, and some companies elect to go in that direction. Typically, their thinking is based upon assumptions that taking the process in-house will give them greater control and communication, greater levels of expertise, a methodology for training new sales resources and, perhaps most importantly, offer significant cost savings.

On the surface, it seems like a simple, cost-effective decision, especially when just comparing hourly rates – the most obvious metric. But unfortunately, the issues are far more complex than that, and those objectives are rarely if ever, met successfully.

Why outsource B2B sales?

First, most organizations don’t have systems in place that facilitate control and tracking of teleservices activity. Success in this endeavour is far more complex than simply mandating some number of calls per day and providing a basic database (CRM) into which the results can be reported.

The requirement to actively manage the process is often overlooked. And that’s not a part-time activity taken on by someone with little or no expertise in the area. There is a need for ongoing monitoring of calls to ensure that your brand is being represented with the degree of quality it deserves. And there is a need for careful review of notes to ensure that potential opportunities are being managed appropriately and are not lost for lack of follow up and tracking.

Outsourcing business development activities

Analogous to medical records, there is a need to ensure that the notes related to the progress of each opportunity are sufficiently detailed to enable someone else to take over the record should the current business developer be replaced. As a result, far more management time is needed than is typically planned. On top of providing systems and dedicated management resources, you’ll need to provide dedicated, isolated space and phone systems that will support phone-intensive activity. Those costs are typically overlooked and are always present in abundance.

Perhaps the most challenging issues related to personnel. You’ll need a systematic methodology for recruiting, hiring and training qualified people. The more complex your subject matter and value proposition, the more difficult it will be to find the “right” people.

Complex products should be handled carefully

Complex B2B/B2C products and services need to be handled in a consultative dialogue, not with a script. That means you’ll need people who can think and probe and listen and “peel the onion.” Personnel management is an ongoing process because there will inevitably be turnover. And, with turnover comes more efforts at recruiting, hiring and training (with lost opportunity cost during the ramp-up period).

That’s true even if a career path is established because you’ll need to replace them when and if a promotion occurs. These rather substantial indirect costs are also rarely considered when a company considers going down the in house path.

You need a skilled in-house sales team

To further complicate matters, because these dedicated people are likely to be doing the same thing day in and day out, all day long, they will be significantly less productive later in the day than earlier.

The more intelligent and sophisticated salespeople you hire, the greater the likelihood that boredom will soon set in (repetition is not stimulating to these folks). This inevitably sales leads to shorter tenure and higher turnover rates. And then there’s vacation and sick leave with lost opportunity costs associated with those periods as well.

We constantly project our productivity as double that of a dedicated in house effort, and I’ve never been wrong about that estimate. If anything, double is a great view of in house productivity.

So, while hourly direct cost is significantly lower using in house resources, the total direct + indirect costs are often 50-70% higher than the rates we charge. In fact, the most common outcome is to scrap the in house resources and go back to the old (extremely costly) plan of the “same old way.”

So, if you successfully manage all of that and end up with a winning program, please let me know. Because, as you can see, it will be unusual.