Consultant vs. Employee vs. Contractor

 

“A criterion is a factor on which you judge or decide something.”

from Collins Dictionary

 

In a community chat room, I saw this question:

“I am looking to put together some guidelines and process around when to hire a consultant vs. contractor vs. an employee -- has anyone done this before/have any guidance?”

The question is highly relevant for many businesses today. Determining the right criteria to decide between a consultant, contractor, or full-time employee can significantly impact your business. Since the criteria might differ depending on the functional area, let me walk you through my thoughts for the sales function, specifically addressing when to hire a Sales Management Consultant, a Fractional or Interim Sales Leader, or a full-time VP of Sales.

 

Sales Management Consultants

Sales Management Consultants offer strategic advice and recommendations. Their services typically include helping businesses define sales goals, analyzing data, recommending territory assignments, coordinating training programs, and addressing various other strategic topics.

As professional advisors, consultants usually do not engage in the implementation of their recommendations or work directly within the client’s team. When employed by large consulting organizations, they are ultimately responsible and accountable to the consultancy rather than the client.

 

Full-Time VP of Sales

Hiring a full-time VP of Sales is a significant investment in both time and money. The recruiting process for a full-time VP of Sales can take up to six months and cost between $50,000 to $70,000. And then, statistically speaking, their tenure only lasts between 12 to 18 months.

The recruitment process typically begins with an internal or external recruiter creating a job description and starting the process of posting, active outreach, screening, and interviewing candidates. This process can be time-consuming and costly. Most executive search firms charge a percentage fee, averaging 33% of the first-year total cash compensation (base salary plus bonus). Even at a reduced rate of 20 or 25%, the cost for a $300,000+ total cash compensation is substantial.

Moreover, the tenure of sales leaders is notably short. Studies show that the tenure of a VP of Sales is only half that of other executives, with younger companies experiencing even shorter tenures. This reality is reflected in sayings like “You’ve Got to Get Past the Carcass of Your First VP of Sales” or “It’s The Second VP of Sales When You Really Start Selling.”

 

Fractional or Interim Sales Leader

A Fractional or Interim Sales Leader operates as a full member of the client company’s management team for the duration of their assignment. Unlike consultants, they become an integral part of the team, working directly within the organization rather than as an external advisor.

These Sales Leaders are typically over-qualified for their assignments, ensuring they can be immediately effective. They bring essential skills and experience at a lower cost than a full-time hire. By engaging a VP of Sales on a fractional basis, companies can significantly reduce their investment, with the opportunity cost being the primary consideration.

 

The Talent Decision

Each option has its pros and cons. The decision of which route to pursue should start with two primary considerations: what the individual is being asked to accomplish and the environment in which they will operate.

During client discovery calls, we assess whether a Fractional or Interim Sales Leader can help address a client’s challenges by reviewing a comprehensive list of topics. This list can also help address the talent decision at hand between hiring a consultant, employee, or contractor:

• Leads: Source, volume, quality, value, nurturing

• Pipeline: Volume, stages, quality, conversion

• Marketing: Strategy, people, programs, spend

• Collateral: Website, demo, hand-outs, testimonials, case studies

• Products/Services: Type, maturity

• Messaging: Script, versions

• Markets: Targets, ICPs, verticals, ranking

• Personas: Decision makers, influencers

• Sales Process: End-to-end, documented, implemented

• Type of Sale: Length, decision makers, complexity, key triggers

• Deal Structure: Size, duration, recurring, renewal

• Sales Team: Size, structure, source, background, compensation, turnover

• Sales Hiring: Past experiences

• CRM: Users, usage, end-to-end, integration, other systems

• Competition: Direct, indirect

• Success: Revenue, number of clients

• Goals: 3/6/12 months, revenue, number of clients

These data points form the foundation for establishing guidelines around the required past experience, degree of specialization, and time required.

 

Here are three simplified scenarios to further guide the decision-making process:

1. One-off Project: Use a Sales Management Consultant.

2. Less Specialization and More Time Required: Hire a full-time VP of Sales.

3. High Specialization and Less-than-Full-Time Requirement: Engage a Fractional or Interim Sales Leader.

The decision between engaging a consultant, contractor, or full-time employee should be based on the specific needs of your business, the tasks at hand, and the environment in which the individual will operate. By carefully considering these factors, you can make a strategic decision that aligns with your business goals and ensures effective outcomes.

 

If you would like to explore the question for your business, please reach out, and we will set up a time for a discovery call.

 

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