The first point to consider when deciding whether to build your own sales team or outsource your lead generation is to measure the volume of your inbound marketing leads. Do you have enough to justify hiring a full time employee? The level of your inbound demand is key to assessing whether or not you could save money by outsourcing sales activities.
As a guideline, we would suggest that a single sales resource should be working through 300 marketing qualified leads every month (based on 20 working days at a disposition rate of 15 leads per day). Anything less than this, and the resource will most likely be making up the rest of the available time doing hybrid activities — which in their unattractive nature can be a nightmare to manage.
It’s also worth considering the territories that your inbound response is coming from. If you have 150 coming from the US, 50 from the UK, 50 from Spain and 50 from Germany, hiring a sales rep will only be worthwhile if you can pull off the minor miracle of finding a trilingual sales person. You may find that if you’ve hired a full time resource that is dedicating a large amount of his or her time to proactive sales activity due to a lack of inbound activity in their native tongue, it can be very difficult to motivate and manage this element of their role.
The bottom line is, if inbound demand is very clearly demonstrable for your company, and manageable in terms of language restrictions: go ahead and build your own sales team. If you are lacking in inbound response demand, then you’d better hope you have an extremely strong, disciplined and consistent management system overlooking your sales team. Otherwise, consider outsourcing your sales activity.
The True Cost of an In-house Sales Team
On face value, it can easily look as though recruiting your own sales team makes far more sense than outsourcing this function. Why pay a premium to outsource sales, when it can be done so much cheaper in-house? It’s a very good question, and one that yields a surprising answer.
The true cost of hiring an inside sales representative is easily overlooked, as there are many factors that businesses can fail to take into consideration.
The average cost of an inside salesperson in San Francisco (as an example) is estimated at $50,000 by the recruitment database GlassDoor. At this rate, we can expect that with OTE factored in, the total cost of one resource would be $75,000. In London, the same resource would cost around £50,000 including OTE. However, the average cost of an inside salesperson is for exactly that — an average salesperson. To hire a top performing salesperson, at least 10% of the salary should be added on top. This puts the salary at $82,500 in The Bay Area, and £55,000 in London.
Other various employer charges such as benefits, pension and medical care all add up as well, and we can assume that these costs will add another 15% of the sales rep’s salary to the employer’s outlay. We’re now looking at salaries of $93,750 in San Francisco and £62,500 in London.
Management of the resource is another cost often overlooked. If your sales manager is looking after five resources in total (an average across organizations that Operatix works with), it’s fair to allocate 20% of the manager’s salary as an added cost to each salesperson. On the basis that your sales manager is earning at least as much as the sales rep, the sales rep’s total cost per annum is now at $108,750 in San Francisco and £72,500 in London.
Technical expenses for an inside sales representative such as database systems and software licence fees are another unavoidable yet often unconsidered cost. For this expense, we can expect to add around $500 per month in San Francisco or £350 per month in London. With licensing and data expenses added in, the cost of an inside salesperson is $114,750 San Francisco and £76,700 in London.
Miscellaneous expenses such as cost of seats, essential office equipment and bills are a relatively meager addition, so we can assume that they add around $1000 annually in San Francisco and £1000 in the UK. This now leaves us with a figure of $115,750 per annum for an inside sales representative in The Bay Area, or £77,700 in London.
Already these figures are considerably higher than the $75,000 and £50,000 OTE salaries of an inside sales representative. And that’s not even factoring in the costs of recruitment and replacement.
The cost of initial recruitment is anywhere between 12% and 22% of the salary according to recruitment experts Quarsh. Utilizing the minimum 12% cost of recruitment, the total cost of a sales rep is, so far, at $124,750 in The Bay Area, or £83,700 in London.
The cost of replacement comes into play when your salesperson is either: promoted, poached or moved on. On average, a salesperson stays in their job for around 2 years, according to Sales Readiness Group statistics. A Center for American Progress study found that it costs, on average, 16% of the yearly salary to replace an employee. If you’re paying 16% of the salesperson’s salary every two years to replace them, you can average that cost out to 8% of the salary per year. With the cost of replacement factored in, the total figure for an inside sales representative’s yearly cost comes to an estimated $130,750 in San Francisco and £87,750 in London.
If you’re struggling with inbound demand, then take these total figures and think again. Is outsourcing lead generation really more expensive than setting up an inside sales team?
Aurelien Mottier – CEO Operatix