Is The Sales Model As We Have Known It Done?
CEO’s and Presidents, want to shake up your first executive leadership meeting of the year? Bring copies of this recent Forbes article for your team to consider, “How To Become A Billionaire by 33: Don’t Hire Salespeople.”
Is it blasphemy for a blog dedicated to Sales Leadership to promote this story about a company growing so successfully – without a sales force? No doubt it is to some old school’ersout there. No sales force means no sales leader, right? And what other traditional sales principles does it call into question?
But consider this matter from the CEO’s point of view. A company’s sales organization doesn’t exist for any reason other than to create revenues. If that responsibility can be accomplished in a non-traditional manner then why not consider it. The aforementioned Forbes article profiles a wireless-networking equipment company called Ubiquiti that has no sales people. Ubiquity was launched in 2005 and in the 12 months ending Sept 30 it netted $64 million on $243 million in sales – the highest margins of any publicly traded computer hardware firm!
Instead of a sales force, this global company relies on a network of distributors and resellers for all revenues.
Is this the future of sales for B2B companies? Not at all, but it clearly suggests there are ways to achieve very successful revenue growth with non-traditional approaches to the sales model. Consider these situations of company’s that may benefit from seriously rethinking their revenue growth strategy.
Small Company with Strong Growth Potential
We talk to many CEOs and founders of smaller, emerging companies that are convinced they need to hire a sales team to “get to the next level” of revenue growth. In many cases that is ultimately what they should do, but too many rush this decision before considering foundational aspects of the sales model that should precede hiring the first rep. Important things come before hiring a sales team if you want to create a selling system for long term, sustainable success.
Big Company with Stagnant Growth Rates
Another common situation we encounter is larger organizations, (i.e. billion-plus in revenues) which are stuck in flat or low single digit revenue growth rates. They churn their Chief Sales Officer every 18 to 30 months, experience higher than average sales rep turnover, have a hard time winning new logos and continue disappointing investors. Breaking this cycle is hard to do, particularly if the hiring profile for the CSO doesn’t change.
Big or small, the numbers suggest a tremendous percentage of B2B companies are highly dissatisfied with their sales model. Consider these woeful statistics:
- Chief Sales Officer tenure averages between 24 and 27 months according to HR Chally Group while another study indicates the average is as low as 19 months (ES Research Group); reported in Selling Power magazine.
- The percentage of reps making quota has been stuck in the fifties (percentile range) for years according to CSO Insights annual Sales Performance Optimization study.
- In Sales Performance Management 2012, Aberdeen Group reported that 56% of companies indicate they are not seeing sufficient revenue growth, 29% don’t convert enough of their sales leads and 27% do not believe their sales forecasts are accurate.
Would any CEO or Board of Directors tolerate performance measurements like these from their production, manufacturing or finance organizations? Of course not! Why then are sales metrics like these so common? Why are the averages stuck in the mud, if not getting worse?
The real question is “Where Does Sales Go From Here?”