Be Effective and Economical

 

“Founders should stick to their core competency and get fractional for everything else.”

Tim Barton (Freightquote, Edison Spaces, Menlo Food Labs)

 

Managing a sales team of under eight people is a challenge for a business.

It’s challenging because small sales teams have a diseconomy of scale. The marginal cost of sales management per rep is increasing with every hire. Those can be direct cost, but also opportunity cost.

Economic theorists have long believed that companies can become inefficient if they become too large or are below certain thresholds. The theory is that for any given combination of factors (e.g., labor (aka sales team), equipment, leadership), there is an optimal scale for efficiency. Firms that are not at these optimum scales cease experiencing economies of scale and begin experiencing diseconomies of scale.

How does that work for a smaller sales team?

Managing a sales team centers around achieving three primary goals:

·       Improve the sales process and maximize sales.

·       Fully utilize the available time/resources.

·       Keep the cost of sales management per employee at a reasonable amount.

The big factor when there is a smaller sales team is the span of control: How many direct reports does the sales leader have? How many can he/she effectively manage? Here are some factors affecting that span of control in sales management:

1.     Geographical dispersion: if the reps are geographically or culturally widely dispersed, then the Manager will find it more challenging to supervise.

2.     Capability of sales reps: if reps are highly capable, they need little supervision and can be left on their own, as they are motivated and take the initiative to work.

3.     Capability of managers: an experienced manager with a good understanding of the tasks, good knowledge of and relationships with the reps will be able to supervise more.

4.     Similarity of tasks: if the territories, products, or targets that the reps are dealing with are similar, then the Manager can supervise them as a team.

5.     Volume of other tasks: if the Manager wears many different hats or is involved in other projects, the number of direct reports will need to be smaller.

6.     Required administrative tasks: if the Manager is required to have regular face-to-face meetings, complete appraisal, and development plans, discuss remuneration benefits, write job descriptions and employment contracts, explain employment policy changes and other administrative tasks, the span of control may be reduced.

 

As an example, in a business with an existing Sales Director with 3 office-based inside reps selling the same SAAS solution, adding a fourth one doing the exact same thing will result in an economy of scale. Adding a fifth rep home-office based in Brazil, selling a new product just of the Brazilian market, will result in diseconomies.

 

What options does the owner, founder, or CEO of a small business with 2 or 3 sales reps have?

 

·       No Sales Manager - leaving a sales team, any team, to its own devices, is detrimental: https://www.vendux.org/blog/what-happens-to-an-organization-without-sales-leadership

·       Owner/Founder/CEO is the Sales Manager - if the individual has the right sales management experience and skill, there is still the opportunity cost of wearing multiple hats.

·       Player/Coach - a sales rep doubles up as the Manager. This person will forever struggle to prioritize between closing their own opportunities and supporting the team.

·       Hire a Full-time Sales Manager - 2 or 3 reps are a very small span of control; there are not enough sales management responsibilities to keep the Manager 100% busy.

·       Contract a Fractional Sales Manager - you get what the business requires without any opportunity cost, and you only pay for the sales management you need.

 

Contact us to find out if a fractional or interim sales leader is the right solution for your business.

 

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SalesQB - Methods to Manage a Small Sales Force

 Photo by Anne Gosewehr