When David Greenberg launched Parliament Tutors (an academic coaching service targeting students from kindergarten to college), in 2009, he did everything—from sales and marketing to training and recruiting. The multi-tasking paid off because a year later, the twenty-something wunderkind found himself in an enviable position: His startup, whose staff consisted of just himself and an academic advisor, was thriving, having reached $30,000 a month in sales. Upon hitting that figure, the NYU graduate decided it was time to hire his first sales rep.
It was an auspicious move. In January, Parliament Tutors, which now employs more than 500 tutors (most of whom are independent contractors), has four full-time employees and serves customers in 25 states, had its best month ever with sales of $52,000. A large part of that success, according to Greenberg, is attributable to his decision to hire a sales rep.
Still, it wasn’t easy. “Making that step was definitely intimidating because things obviously slowed a bit while [the sales rep] adjusted into his new role,” Greenberg admits. “However, it proved to make sense, while I focused on improving our business model and growth strategy.”
For entrepreneurs like Greenberg, hiring a sales rep can be a pivotal point in a company’s growth. The critical question is: When is the right time to make such a hire? Is it the obvious—when your company starts generating profits and you are unable to meet your business objectives without assistance? Or are there other circumstances that warrant it? Furthermore, how do you train and retain these new sales reps so they will fit in with your corporate culture and not flee for greener financial pastures once another opportunity arises?
Hire when it’s affordable
“New businesses should hire their first sales rep as quickly as they can afford it,” says Michelle Furyaka, executive vice president of NPD Global Inc., a five-year-old executive recruitment firm based in New York City.
However, she acknowledges there’s a catch. “It takes time to find the right personality to work for a small firm,” she cautions. “Don't be fooled by a sales rep that promises you a lot of business. Small companies struggle to pay a top-notch person and they wind up leaving quickly because they are not used to rolling up their sleeves.”
For Greenberg, it helps that his first sales rep shared his vision about education and had done plenty of homework about the company well before the job interview.
“When we spoke, he was less focused on the deficiencies in the system, and was incredibly knowledgeable on what was working,” Greenberg recalls. “I was really impressed, considering most of my interviewees focused on the problems when asked to discuss the education environment today.”
NPD Global hired its first sales rep a year after its launch. “We stabilized our expenses and became self sufficient,” relates Furyaka. “Once all operational expenses were covered, we were ready to grow. In the beginning, one of the principals was doing all the sales, but once we reached a certain number and she was needed for another role, we were ready to hire.”
Although NPD Global’s first sales rep did play a key role in growing overall sales, profits were still flat. Management underestimated the total cost of hiring a sales professional. “We found the right person who helped us open a few new accounts, but there were expenses affiliated with him, such as salary, support, and client [costs].”
Analyze your sales cycle
The equation changes if the sales position is a straight commission role, says Tom Armour, co-founder of High Return Selection, which helps small- to medium-sized businesses attract and retain top talent. In this case, the cost can be relatively low.
The length of the sales cycle is a factor as well. “Sales roles vary dramatically across businesses,” continues Armour, an HR executive who once worked at Hewlett-Packard. “Basically there are sales roles that sell products, while others sell services. The length of the sales cycle can vary from one hour to 18 months.” Armour cites retail sales as an industry with a sales cycle that can be completed quickly, typically within an hour, while B2B product or service sales can take months to complete. Longer sales cycle jobs can cost a business 10 percent to 15 percent of new sales, he says.
Time it right
Other than when your company starts growing revenue, when is it time for your small business to hire a sales rep? Here are a few more hints from the experts:
- You don’t have the time anymore to generate leads and follow-up with potential or existing customers in a timely fashion.
- You are not a skilled sales person.
- Your time is better served in working on other areas of your business.
Like a casting director seeking out the right actors for roles, small business owners should be deliberate when bringing on a sales rep that best matches their company’s culture.
Other best practices to employ:
- Make sure your first sales hire has values that match your own. “Your first sales rep is going to be the new face and the front line of your business,” advises Greenberg. “Don't just consider their ability to ‘sell’ a customer.”
- Look for people with a solid work ethic. They don’t need to be from the same industry, says Furyaka. “If the foundation is there and they are willing to learn, you will retain them and everyone will be happy.”
- Offer competitive compensation and enticing incentives. “A top sales professional can make good money in many businesses,” maintains Armour, “but it is the leadership and recognition that retains them.”