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When to Hire Your First Sales Rep

Guest post by: Russ Lombardo

Article Overview: Recently I was speaking at a conference in Vancouver when one of the attendees approached me after my speech with an interesting question. He said he was a technology reseller and was getting very serious about bringing his business to the next level. In order for him to focus more on his business, he needed to get out of the role of selling and completely dedicate himself to running his business. His question was, when should he hire his first sales rep. Interesting question since you would think that if he was ready to move forward, as he said, then the answer was simple – hire the sales rep now. But it’s a bit more complicated than that. So here is what I told him.

When to Hire Your First Sales Rep

Recently I was speaking at a conference in Vancouver when one of the attendees approached me after my speech with an interesting question. He said he was a technology reseller and was getting very serious about bringing his business to the next level. In order for him to focus more on his business, he needed to get out of the role of selling and completely dedicate himself to running his business. His question was, when should he hire his first sales rep. Interesting question since you would think that if he was ready to move forward, as he said, then the answer was simple – hire the sales rep now. But it’s a bit more complicated than that. So here is what I told him.
There are several things you need to consider when you hire your first sales rep. These items will also benefit you as you hire subsequent sales reps and build your sales organization.
1. ROI. How much revenue will the new rep bring in versus the revenue you are currently generating? It’s almost a no brainer. If you believe a dedicated sales rep will sell more than you have been selling, then get out the interview questionnaire, because the return on your investment should be good and you are “almost” ready to hire.
2. Time. How much time are you currently spending in the act of selling? My conference colleague said he spends about 30% of his time selling. In theory, a dedicated sales rep is 100% dedicated to selling. So, you would think that the sales rep could conceivably triple your sales. However, sales people do not spend 100% of their time actually selling. There are other tasks and activities that interfere with their day. Administrative duties, travel time, planning, research, and training are just a few of the items that are not direct selling activities. I read a survey recently that said the average sales rep spends up to 15% of their time with personal email. Nevertheless, a dedicated sales rep should spend more time selling than the business owner was able to. So increased selling time, and therefore revenue, should increase.
3. Sales Process & Training. Do you have a sales process to help the new sales rep be more effective? Chances are that if you are the business owner and have been doing all the selling yourself, you probably do not have a sales process. A sales process defines the steps necessary to successfully close a sale, from Cold Calling to Closing, and of course, the customer retention strategy that follows a sale. A sales process also includes the metrics in which to measure the progress and success of the sales rep. While a sales process defines the steps necessary to make a sale, selling skills help the sales rep with performing each step more successfully. For instance, you not only need to say WHEN to qualify a prospect in the sales process, but also HOW to qualify a prospect the right way. So you need to make sure you provide sales training for your sales reps. True, they should bring these skills with them when they are hired. But every sales rep can use on-going and continuous training throughout their career. Make sure you have a good sales process as well as an on-going sales training program.
4. Technology. To assist with tracking sales information, measuring metrics on sales performance, and managing client/prospect activities, a good CRM (Customer Relationship Management) system, or at minimum a contact manager, should be deployed. While the sales process and sales training discussed earlier will help with effectiveness, a CRM tool will make the sales process, and rep, more efficient.
5. Budget. Can you afford to hire this new employee now? Part of the answer to this question is how much will the new sales rep cost you. And this is answered by the following considerations.
a. Commission. A question that always comes up regarding commissions is if you should pay the new rep 100% commission, and no base (guaranteed) income. I’m always reluctant to do this in the beginning because you’ll get what you pay for. I know of several business owners who did this and wondered why they kept getting a bunch of bad candidates for their sales positions. If they are earning an income entirely based on what they sell, guess how much they’ll earn in their first few months. Close to zero. You have to give them time to ramp up and learn your product, your company, the market, the clients, and more. So help them out. Give them a small base salary plus commission. Then you can reduce their base each quarter until they are earning no base salary after, say, six or twelve months. This gives them something to live on while they are ramping up. It’s all about balancing the base and the commission to suit you and the employee.
b. Interview Process. This almost goes without saying. Make sure you hire the right person. You’ll need a clear, concise job description, an attractive commission structure (see above), and do a good background check. Also make sure you ask good, qualifying questions to ensure you hire the right candidate. Hiring the right candidate will have a direct affect on your budget since replacing a poor choice costs you more than hiring no one at all.
c. Ramp-up Time. This will be the transition time since it will determine how quickly the new sales rep will begin generating enough revenue to pay for himself while giving you some profits. It may require you to sustain sales until the new sales rep can take over. Don’t just turn over sales to the new rep and walk away. Plan for ramp-up and transition time.
d. Retention. Nothing can cost you more than having to re-hire a new sales rep because the prior one didn’t work out. I know some business owners who are stuck in this rut and keep hiring and firing reps over and over again. Not only does this cost a lot in your time, training, etc, but it also is a sure way for you to generate no revenue in the meantime. Make sure you hire the right person (see above), provide incentives, give them the ability to contribute ideas to your business, give them the ability to earn a lot of money, reward them, give them career growth, and more. Make them WANT to continue working for you and EARN the right to.
6. Long-Term Plan. Is this the start of building a sales force? Will you want to eventually hire a sales manager? Is your first sales rep management material? What’s your timing for growing your sales force? Of course, a lot of these questions will be determined by your revenue growth. However, like a business plan, your sales force plans should be laid out in the beginning so you know if and when you reach key milestones. In other words, don’t just hire your first sales rep and “see how it goes.”
7. Resources. Can your business sustain the growth resulting from the new business you’ll be getting? Can you handle the increased sales that will come in from the new sales rep? Your consulting or professional services are a finite resource and the new business requirements may exceed your capacity to handle the work. Make sure you are staffed appropriately by balancing the newly generated sales with the resources needed to accommodate it.
8. Commitment. How committed are you to bringing on a dedicated, full-time sales rep? Will you really step back and let your new rep sell? Will you trust him to do his job? Trusting him doesn’t mean you just look away and “trust” that the sales will come in. It means you will give him the resources and freedom to succeed. You need to build your sales processes (see above) and use technology (see above) to help the sales rep succeed and to give you the metrics you’ll need to measure their progress. When you measure their performance, you have to use metrics to ensure accuracy and consistency and not rely on your emotions and fear. For instance, I worked for a sales manager once who felt, in spite of me blowing away my numbers and working my tale off, that because he didn’t see me in the office a lot, that I wasn’t working hard enough. He was emotionally involved and relied on his perceptions instead of looking at the facts.
Of course I didn’t go into this level of detail with the business owner who asked me this question. But I highlighted all of them and he felt much more aware of what he needed to do before hiring his first sales rep. If you are at this level of growth in your business, I hope these points help you prepare for what could be a very profitable and successful chapter in your life and business.

Good Luck & Good Selling!
Russ Lombardo

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