In the few short minutes it takes to read this article, we'll go over the pros and cons of working with freelance sales agents and highlight why so many companies need them in order to reach their full sales potential. We'll also dispel some of the common myths and misconceptions people have about working from a commission-only basis.
Before we get started, ask yourself this question:
So what do you do?
Perhaps you decide to take full control of the sales process yourself. You dedicate time to learning the art of sales, making calls, and knocking on as many doors as possible. But who's left to run your business while you're on the phone or in meetings all day?
You now have two options. You can:
a) Reach deep into your pockets and take on your first employee.
Or you can:
b) Pay a self-employed sales professional an agreed-upon commission payable at the close of new business.
Creating a salesforce is the most effective way to attract attention for your products and services, sell into new markets, and expand into wider geographical territories. But how you achieve that is vital to the success of your business. This article will explore the pros and cons of in-house and freelance sales recruitment in order to help you make an informed decision on what sales strategy is right for you.
How do you define an independent sales rep?
Independent sales reps are typically highly experienced and specialize in a certain industry. They decide to become self-employed and work on a freelance basis because they're confident they can generate their own profitable businesses.
Employed lawyers typically work full time from a company’s head office, whereas freelance lawyers build diverse portfolios of clients. The same distinction is true of independent sales agents, who strive to create portfolios of multiple products and services that complement one another without creating conflicts of interest.
As a general rule, it's much easier to set strict working hours for in-house employees. It also gives employers the ability to specify working locations and offices for each member of their team.
Employers often prefer to have a centralized location where they can dictate expectations for the numbers of calls made per day and revenues achieved per month. A home office also makes it easier to monitor and maintain consistency in terms of how their companies are being represented in terms of both employers and managers.
Hiring an in-house salesperson can be a complex and daunting task, especially for small companies new to the business. Aside from the many complex financial and legal requirements associated with taking on staff, there are other potential factors to take into consideration. These include:
The average salesperson will leave his or her position in less than 2 years. (Source: Sales Readiness Group)
The average sales manager has a tenure of only 19 months. (Source: Eyes On Sales)
40% of companies reported a 10+ month ramping period before their salespeople became fully productive (Source: CSO Insights).
Only 57.1% of sales reps achieve their set quotas. (Source: CSO Insights)
And there are additional factors an employer needs to consider before taking on additional help. Paid employees require legally-mandated sick leave, maternity leave, and holiday allowances. It can also be very difficult to let go of an employee who isn't working out the way things were planned. In-house sales agents are usually less geographically flexible than their independent counterparts, which means a more limited talent pool to select from.
Independent sales agents typically start out after collecting many years' worth of experience and a large network of contacts. For this reason, they can provide quick access to products and services in their chosen markets. Take, for example, when Intel bought out Digital Equipment Corp’s semiconductor business. Intel was hugely successful in contracting outside professionals to sell three of their product lines into markets where their in-house staff had no experience or pre-existing contacts.
As sales commissions are only paid upon completed business, there is very little financial risk on the part of the company. Sales reps increase their commission rates by cross-selling and upselling, which means that they pitch each one of their products and services as often as possible.
Freelance sales agents tend to aim for higher percentage commissions than their in-house counterparts. This is partly due to the expenses these agents make while developing new territories and the access they're providing to their hard-earned contacts.
We've already created a comprehensive guide to the things that companies should understand before working with independent sales reps, and you can read over that guide by clicking here. But there are a couple other key factors to put into consideration. For example, the law forbids employers from setting hours or making independent reps work from a specific location. And it's rare that agents will be willing to dedicate all of their time to one company, as their livelihoods depend on representing multiple products and service lines at a time. This, coupled with their tendency to work remotely, can make it difficult for companies to ensure their products and services are being presented in a consistent fashion.
While there are pros and cons about working with both types of sales professionals, it’s important to understand the differences between the two.
As Steven Hamm from Bloomberg’s Businessweek rightly noted, “Companies are willing to outsource their back office operations. So, why not the salesforce?” CommissionCrowd is committed to supplying you with all the best, most up-to-date resources on the independent sales world. Browse out our template for how to create the perfect independent sales opportunity or take a peek at our Expert's Corner series, where we ask some of the industry's top sales experts for tips and tricks to becoming successful. And while you're here, check out our page for companies interested in joining our award-winning services, and see if CommissionCrowd is right for your business.