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The Berkman Letter Practical analysis and commentary for business, law, and more.
We are reviewing our strategic plan as an independent business unit in a larger organization. We are debating whether to ask for a substantial increase in our sales and marketing budget to hire a larger sales team. Some on our team think we should not hire a sales team and instead seek out distributors. There are several in our industry which might be willing to carry our products. What are the pros and cons of hiring a sales team versus contracting with distributors?
Hiring a sales team is usually a bad idea. With the new launch of any product or service you have no idea what it will take to sell. That uncertainty means that you do not know how many sales people to hire, what their commission plan should be, or how to properly compensate them. The right distributor solves these problems. If you cannot get information and assurances to address the issues raised in the other reply then you need a different distributor. A long-term collaborative relationship with a distributor is built on transparency and trust. You need to know that their sales people will be motivated to sell your products. This is a reasonable request of a distributor.
Asking for a budget will scare off some managers, but if you want to control the destiny of your business, a sales team is the only way to go. With distributors, you are at their mercy. A sales team is focused on your business and selling your products. The main problem with distributors is that they are carrying many products not just yours.You must fight for mind share among the distributorâ€™s sales people. Your product must be valuable to them in their compensation scheme. The right question to ask is how much money can a sales rep or a distributor make with your product compared to all other products she or he sells. You might not be able to get that information from a distributor. The managers you deal with to negotiate the contract are not the same as the sales reps with feet on the ground. It's best to have your feet on the ground.