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