Settle in for the story of two would-be hot dog tycoons and the outsourcing misstep that brought down their burgeoning empire.
Growing up, my partner and his brother realized that fellow latch-key kids home alone after school were hungry. There weren’t always snacks available. Some kids weren’t even allowed to use the microwave, let alone go near the stove unsupervised.
The young brothers decide to solve the local ravenous-kid problem with door-to-door hot dog sales. My future husband and his brother heat up the hot dogs at home and sell them to neighbourhood children. They spend the proceeds on penny candy.
Then the brothers realize that they could make candy money AND spend more time playing video games if they outsource the most tedious part: the selling. Instead of traipsing around the neighbourhood themselves, the entrepreneurs enlist a younger friend as their salesperson.
They’re hitting it out of the ballpark until the salesboy’s mother finds out and he’s forced to quit. Without a salesperson, the burgeoning hot dog enterprise folded soon after.
The moral of the story is, you may, too, have wondered if outsourcing parts of your sales process could give your sales team an edge in the market without having to hire in-house but worried about potential consequences.
Outsourcing allows you to “give away” activities that you find time-consuming or overwhelming and let someone else handle it. Then you and your team have more time for things like closing deals and managing your own day-to-day activities.
But, to be frank, there are questions you’ll need to answer before you can decide if outsourcing part of your sales process is right for your sales team and your bottom line. You don’t want to outsource without forethought and have it end up bringing down all your candy-fueled dreams.
So, let’s jump in.
What is outsourcing? How does outsourcing work?
Outsourcing involves obtaining goods and services from a third-party vendor. The negativity surrounding the term generally comes from the pervading stereotype that all companies outsource to foreign vendors and that these foreign outsourcing companies are then taking jobs away from local workers.
Why do companies outsource?
Companies choose to outsource activities for multiple reasons, but most rationales centre on reducing costs and required resources, improving focus, and accelerating growth.
Here's a quick look at some of the most-cited reasons for choosing to outsource:
Pros and cons of outsourcing sales
Sales outsourcing is used by companies to increase their volume of sales without hiring or adding internal resources to its sales team. The company partners with an external, third-party company to perform sales functions. Because of this, outsourcing sales is sometimes referred to as “rent-a-rep”.
Companies can outsource their entire salesforce or part of it. For example, a company may choose to outsource the sales of a particular product line or segment. Some, particularly startups, outsource all of their sales as a market entry strategy to start bringing in customers as quickly as possible.
It’s not the ideal choice for every company, though. Some CEOs, including Kyle Racki here at Proposify, would disagree with outsourcing sales early on, suggesting instead that startups rely on their founders to serve as salespeople until the cash flow allows them to start building an internal sales team. (Kyle talks about Proposify’s approach to early-stage sales in this episode of his LTV with Kyle Racki podcast.)
Outsourcing your sales team requires relationship management between the hiring and the outsourcing vendor to make sure sales are being conducted so the buyer doesn’t realize that the rep they’re working with is not an internal salesperson.
The outsourcing vendor is usually compensated based on the results they produce, whether that’s the number of sales closed, sales revenue generated, number of leads generated, or another agreed-upon metric.
- Outsourcing sales can increase revenue without also increasing overhead costs.
- A good option if your team is operating in a volatile or shifting marketplace and you don’t want to hire and fire sales reps as things change.
- You aren’t required to pay outsourced sales reps
- There is a reputational risk with outsourcing sales, as a third-party will be handling your client relationships.
- You’ll need to spend time building a relationship with the outsourcing vendor and managing the contract to ensure you get the quality and results you’re expecting.
- Could be more upfront and/or one-time costs compared to hiring internally, as salary, commissions, and other hiring costs can be spread out over time.
Pros and cons of outsourcing lead generation
Prospecting, cold outreach, marketing, and advertising can be challenging and time-consuming to do in-house. These lead generation activities require lots of research, content creation, tech and other tools, which means they also need lots of resources.
Lead generation can also be a ‘feast or famine’ situation, especially as a company ramps up its marketing efforts, moves upmarket, or changes its target markets. Inconsistent lead generation wreaks havoc on sales quotas.
- Outsourcing lead generation reduces or removes the ramp-up time that is needed to get BDRs or SDRs doing outreach.
- Most outbound sales reps hired internally tend to be less experienced and therefore less efficient at capturing quality leads. A seasoned external sales team may be more productive.
- With prospecting off their plates, your internal team can focus on negotiating and closing.
- It can be hard to find a lead gen outsourcing company that suits your needs and truly cares about your sales team’s success.
- If you’ve relied on inbound leads, you might have blind spots you need to fix before you can outsource a successful outbound campaign. For example, you might not have heard all of the objections that cold outreach can bring out. You might have to dig deeper into market and buyer persona research before you’re able to successfully outsource your lead gen.
- The knowledge base and processes around your lead generation activities would live outside of your department and company, which could complicate things should you choose to bring it in-house later on.
Should you outsource part of your sales process?
Now that we’ve talked about how other companies outsource, it’s time to look at your own process and whether outsourcing is a good fit. Here are four things to think about:
Do you have what you need to achieve your goals?
Your sales team will have metrics, targets, and quotas to hit. If you don’t have the resources you need to reach your goals, and no way to bring them in internally, outsourcing might be an efficient way to get there.
Are you willing to give up some measure of control?
There’s an understandable impulse to keep everything in-house and under your direct supervision. It can be hard to trust others to do the work. You won’t be able to go through every detail with your outsourcing vendor’s team.
But as a sales manager, a lot of your results are out of your hands anyway, right? Unless you’re micromanaging, you’re not going to be involved with/on top of every activity your internal reps are doing.
What’s your ACV?
If it’s low, you might not generate enough sales revenue to justify having outside lead gen bringing in those “smaller fish” for you to close, for instance. Same for super-short sales cycles and non-persona targeted sales (i.e.: you’re selling to everyone anyway so outsourced lead gen might not be a help).
What effect will outsourcing have on your company culture?
Existing employees might feel like they’re being replaced, that they are doing poor work, or that their position will be next to be outsourced. It could also cause confusion around who is responsible for which tasks and results if that’s not properly communicated from the start.
6 questions to ask when considering working with an outsourcing company
If you decide that outsourcing part or all of your sales process is right for your company, finding a reputable outsourcing company to partner with is the biggest success factor. Here are the questions you need to ask as you vet potential vendors:
What’s their track record?
What does the vendor’s experience history look like? Who else have they worked with and what kind of results have they created for them? Is it quality work?
How do they staff and train their team?
Is their team internal or will they, in turn, outsource to fulfill your contract? Will people be dedicated solely to you or will they be working on multiple contracts and campaigns at the same time? How do they recruit and train?
What is their usual plan of attack?
What channels will they use? What’s the mix—phone, email, chat? What tools/tactics do they use?
How will your relationship be managed?
What will your relationship look like? How will it be managed? What kind of time commitment will be needed from you?
What happens to the data?
Where does the data live? Do the leads and their contact details, etc. belong to you? Or does this information stay with the vendor, possibly to be re-used with other clients (maybe even the competition)?
What will success look like?
How will you know if the campaign is working? When can you expect reporting from them? What are the specifics the reporting will include?
Much like hot dogs and door-to-door selling, sales outsourcing is not for everyone. Outsourcing could be a permanent part of your sales strategy, a convenient short-term solution, or something you choose to steer clear of.
Whatever your conclusion, having all the facts to make an informed decision is number one.