Ultimately, you have to look at your outsourced sales suppliers’ role in the value chain, as well as where and how much additional knowledge they bring to the process. When interviewing your potential sales supplier, be sure to assess the quality and sales maturity of their team. You will pay more for experience, but the added value in terms of ROI will more than outweigh the added cost.
To analyze the true comparison between keeping your team in-house, and outsourcing to a professional sales supplier, you must look beyond salaries, commissions, and bonuses.
It’s important to look at all the factors that affect your fully burdened in-house sales team costs, including:
- Capital expenses, facility costs, and equipment: Adding personnel requires space and equipment. In order to expand your internal sales operation to capitalize on new opportunities, you need to lease more space, and provide more infrastructure, such as telecommunications, computer networking, and a robust tech stack. All are required to make your growing sales team productive.
- Recruiting and training: Expanding in-house sales means hiring more sales professionals, which takes time and money. According to the Society for Human Resource Management (SHRM), the average cost per new hire is $4,425, and the process takes 36 days, not including onboarding. Other studies show that it actually costs $97,960 to replace a departing sales rep, including onboarding and training. That doesn’t include the cost of recruiting itself, or the amount of revenue lost while onboarding new staff. When it comes to bringing on fresh sales talent, it usually takes eight to 10 weeks of training, with productivity ramping up throughout the first year.
- Benefits: If you are going to recruit the best and the brightest, then you have to offer competitive benefits to include: health care, disability insurance, retirement plans, and other incentives. When you throw-in employment taxes and benefits, you are paying between 1.25 and 1.4 times the actual base salary.
- Management overhead: In addition to the direct costs of adding staff, you have the indirect costs imposed on management. Your senior team will be responsible for developing sales processes, training, new tech research, and managing the new teams to help make them more productive, which means their own productivity will be affected.
- Geography: Geography is another factor that impacts staffing costs. If your in-house sales team is based in New York, San Francisco, Seattle, Chicago, Los Angeles, or other high-wage markets, then you will pay more for sales talent. Outsourced services can be located anywhere, which means they can offer competitive wages and benefits in an area that features a lower cost of living. MarketStar is headquartered in Ogden, Utah, which allows us to hire the best available staff for less. For example: The cost of living in San Francisco, Calif. is 210 percent more expensive than that of Ogden, Utah
As you become more serious about outsourcing your inside sales team, be sure the financial arrangement balances risk between both parties so it reflects the value you expect from the relationship. In addition to fixed fees, compensation should be structured to share risks and rewards based on performance so your sales supplier has a stake in the relationship and is motivated to perform within the set boundaries.
When shopping for a Sales-as-a-Service supplier, remember that when outsourcing, as with all things, you get what you pay for. By choosing the option with the lowest cost, you are likely to sacrifice expertise, leadership, and the ability to execute.
As you compare the cost of insourcing versus outsourcing sales, you need to consider economies of scale, both in terms of expenditures and returns. Outsourcing to a dedicated Sales-as-a-Service company gives you access to talent and technology that would be more difficult, expensive, and inefficient to replicate in-house. Further, the outsourced expense is not listed as a personnel cost, but as a separate line item in your budget, which offers both budgeting and tax advantages.
Your outsourced sales supplier will function as a dedicated revenue engine and should be able to demonstrate results counted on the value side of the ledger.