| Thinking of taking your information technology | | | | environment while trying to meet a sales quota. |
| company to the next level with a major marketing | | | | Throw on top of that the objection that he has |
| campaign or by hiring additional sales resources? | | | | never had to deal with before, the small company |
| These are decisions that can impact your company's | | | | risk factor, and the odds of success diminish. Finally, |
| future. It might be time to consider the alternative of | | | | this transformation from a core group of early |
| selling your business. | | | | adapters to now selling to the conservative majority |
| We are often approached by software company or | | | | elongates the sales cycle by 25% to as much as |
| information technology business owners at a | | | | double his prior experience. If you don't fire him first, |
| crossroads of taking the company to the next level. | | | | he will probably quit when his draw runs out. |
| The decision in most cases is whether they should | | | | With all this going against the business owner, most |
| bring on the one or two hot shot sales people or | | | | of them go ahead and make the hire and then I hear |
| channel development people necessary to bring the | | | | something like this, "Yes, we brought on a sales guy |
| company sales to a level that will allow the company | | | | two years ago who said he had all the industry |
| to reach critical mass. For a smaller company with | | | | contacts and in nine months after he hadn't sold a |
| sales below $5 million this can be a critical decision. | | | | thing and cost us a lot of money, we fired him. That |
| For frame of reference, prior to embarking on my | | | | really hurt the company and we have just now |
| merger and acquisition advisor career, I spent my | | | | recovered. We won't do that again." |
| prior 20 years in various sales capacities in primarily | | | | What are the alternatives? Certainly strategic |
| information technology and computer industry related | | | | alliances, channel partnerships, value added resellers |
| companies from bag carrying salesman to district, | | | | are options, but again the success rate for these |
| regional, to national sales manager and finally Chief | | | | arrangements are suspect without the sales |
| Marketing Officer. So when I look at a company, it is | | | | background in the executive suite. A lower risk |
| from the sales and marketing perspective first and | | | | approach is to outsource your VP of Sales or Chief |
| foremost. I am sure that if I had a public accounting | | | | Marketing Officer function. There are a number of |
| background, I would look at my clients through those | | | | highly experienced and talented free lancers that you |
| lenses. | | | | can hire on a consulting basis that can help you |
| So with that backdrop, let's look at what might be a | | | | establish a sales and marketing infrastructure and |
| typical situation. The soft ware company is doing $3.5 | | | | guide you through the staffing process. That may be |
| million in sales, has a good group of loyal customers, | | | | the best way to go. |
| produces a nice income for its owner or owners, and | | | | An option that one of our clients chose when faced |
| has a lot more potential for sales growth in the | | | | with the six points to consider from above was to |
| opinion of the owner. Some light bulb has been lit | | | | sell his company. This is a very difficult decision for an |
| that suggests that they need to step this up to the | | | | entrepreneur who by nature is very optimistic about |
| next level after relying on word of mouth and the | | | | the future and feels like he can clear any hurdle. This |
| passion and energy of the owner to get to this | | | | client had no sales background but was a very smart |
| stage. | | | | subject matter expert with an outstanding |
| I have either spoken with more than 30, primarily | | | | background as a former consultant with a Big 5 |
| technology based companies over the years that | | | | accounting firm. He did not make the hiring mistake, |
| have faced this exact situation and can count on one | | | | but instead went the outsourcing of VP of Sales |
| hand the ones that had a successful outcome. The | | | | function as step 1. When their firm wanted to make |
| natural inclination is to bite the bullet and bring on that | | | | the transition from the early adapters to the |
| expensive resource and hope your staff can keep up | | | | conservative majority, the sales cycle slowed to a |
| with the big influx of orders. The reality is that in | | | | crawl. Meanwhile their technology advantage was |
| most cases the execution was a very expensive | | | | being eroded by a well funded venture backed |
| failure. Below are several factors that you should | | | | competitor that had struck an alliance with a big |
| consider when you are at this crossroads: | | | | vendor. |
| 1. The 80 20 rule of salesmen. You know this one. | | | | They engaged our firm to find them a buyer, but |
| 80% of sales are produced by 20% of the | | | | then we encountered the valuation gap. Our business |
| salespeople. If you are only hiring one or two, the | | | | seller thought his company was worth a great deal |
| likelihood is that you will not get a top performer. | | | | and that he should be paid with cash at close for all |
| 2. The president of the company and decision maker | | | | the future potential his product could deliver. The |
| has no sales background so the odds of him making | | | | buyer, on the other hand, wanted to pay based on a |
| the right hiring decision are greatly diminished. He will | | | | trailing twelve months historical perspective and if |
| not understand how to properly set milestones, | | | | anything was paid for potential, that would be in the |
| judge progress, evaluate performance objectively, or | | | | form of an earn out based on post acquisition sales |
| coach the new hire. | | | | performance. |
| 3. To hire a good salesman that can handle a | | | | With a well structured earn out agreement and the |
| complex sale requires a base salary and a draw for | | | | right buyer, our client will reach his transaction value |
| at least 6 months that puts him in a better economic | | | | goals. His earn out is based on future sales, but his |
| condition than he was in on his last job. So you are | | | | effective sales force has been increased from one |
| probably looking at $150,000 annual run rate for a | | | | (himself) to 27 reps. His install base has been |
| decent candidate. | | | | increased from 14 to 800. Every one of the buyer's |
| 4. If you have not had a formalized sales effort | | | | current customers is a candidate for this product. |
| before, you are probably lacking the sales | | | | The small company risk has been removed going |
| infrastructure that your new hire is used to. Proper | | | | from a little known start-up with $500 K in revenues |
| contact management systems, customer and | | | | to a well known industry player, publicly traded stock |
| prospect databases, developed collateral materials | | | | with a market cap of $2.5 billion. |
| and sales presentations, sales cycle timeframes and | | | | He avoided the big cash drain that a bad sales person |
| critical milestones and developed competition feature | | | | hiring decision would have created and he sold his |
| benefit matrixes will need to be developed. | | | | company before a competitor dominated the market |
| 5. Current customers are most likely the early | | | | and made his technology irrelevant and of minimal |
| adapters, risk takers, pioneers, etc. and are not afraid | | | | value. |
| of making the buying decision with a small more risky | | | | My professional contacts sometimes tease me and |
| company. These early adaptors, however, are not | | | | suggest that I think every company should be sold. |
| viewed as good references for the more | | | | That may be a slight exaggeration, but in many |
| conservative majority that needs the security of a | | | | instances, a company sale is the best route. When a |
| big company backing their product selection decision. | | | | information technology business owner is faced with |
| 6. Your new hire is most likely someone that came | | | | that crossroads decision of bringing on a significant |
| from a bigger information technology company and | | | | sales resource that will be faced with a complex sale |
| may be comfortable performing in an established | | | | and the executive suite does not have the sales |
| sales department. It is the rare salesman that can | | | | background, a company sale may be the best |
| transform from that environment to developing the | | | | outcome. |