I have spent the past 6 months away from the business I helped to start and ran for eight years until it reached 50 people and about £5m revenue. During this time I have worked with some corporates, but mainly SME’s who are at the tricky 10 to 20 people and £1m to £2m turnover. One of the areas I am helping with is sales strategy.
The second phase of growth for an SME, after it has become established and survived, is one of the trickiest. In a service business, this early period between £1m and £2m turnover, can still be a problem because the sales pipeline has not yet become predictable and cash fluctuates significantly. For some owner managers it might be the first time they have been able to pay themselves properly and so what little cash they have has been impacted through a dividend payment.
At this stage, a proper sales function has not normally been established and it would appear that for many owner managers this is the next natural step. But this is riddled with problems:
- The hit rate for hiring a sales person is pretty low, because most posess the “gift of the gab” and so come across really well. That does not necessarily mean they will be any good. Equally, the hiring organisation may not have the hiring skills to differentiate between the good and the bad.
- Really good sales people are difficult to attract when you are a small business. This creates a bit of a “beggars can’t be choosers” dynamic and causes hiring errors.
- Sales people can be really expensive. Not least because of the basic pay of the really good ones, but also because of the bonus plan. I haven’t met many SME’s that have created a fincially viable bonus plan and frequently accelerators strip out significant levels of profits.
The most important issue that I have come across, and I believe is widely present, is that owner managers are unclear about why they are hiring a sales person. The confusion comes between understanding whether it is demand generation, deal getting or account management that is required. Not all of these exist in every sales person so it is important to be clear. My advice to most of the SME’s I meet is not to hire a sales person until they have answered this question.
In most cases, SME’s have also not exploited the potential of the clients they have worked with and this can also put off the need to establish a sales team. More on that soon.