Sales and Selling: The Oxygen of Business

Sales and Selling: The Oxygen of Business

The reason that sales and marketing are discussed at the beginning of this article is very simple: Without sales, you won’t need any other advice about running a small business. And marketing  is the artillery that helps sales advance more easily.

Many business people do not consider sales to be a real profession but just ask any seasoned a business executive who he or she values the most, and the answer will be the people that bring home the sales. Hunters (people who bring in the deals and make sales happen) and skinners (administrators and those who fulfill sales agreements) are both important in an organization, but sales trumps all.

Some who are starting a small business may believe that a sales force is not needed. After all, family, friends, and business colleagues are impressed by your venture and are promising big deals and sales. It’s not a good idea to depend upon this. In today’s ultracompetitive environment, the serious business volume will only come through serious sales efforts generated in a professional manner.

We begin this chapter with a review of fundamental sales concepts and how they apply to your small business. The discussion includes both sales qualifying and the different stages in the sales process. Every small business should understand how this cycle works for them so that sales resources can be applied to the prospects most likely to buy.

The chapter also discusses various ways in which sales forces are structured and managed, and the pros and cons of each. Here, the small business owner may learn about and consider selling through a direct sales force, an inside sales group, telemarketing efforts, agents, business partners, dealers and distributors, retail (direct), and on-line. The issue of channel conflict is also reviewed, and some advice is provided on selling to government as well as internationally.

There is nothing that can buoy the success of a small business more than an effective sales force, so we provide some tips on how to hire and fire and weed and seed until the best possible the group is in place. Managing salespeople is different

than managing other employees. They require more maintenance, so we talk about what to expect and how to deal with conflicts over commissions, recognition, and assigning accounts.

Selling your product or service is the most important part of any business; if you find the magic-bullet solution to sales, just about everything else will be easy. Most experienced pros would much rather manage an effective sales force selling a lousy product or service then the reverse. If you still don’t believe this, look around at all the mediocre products on the shelves today that were brought to dominance by the right marketing and sales strategies. (I could name more than a few, but then I’d get into trouble!)

Further, there is a common misconception that because entrepreneurs know their products or services intimately, they can sell them easily. Small business owners must face up to the fact that they often are not the best people to generate revenues for the company. This chapter discusses ways of dealing with these issues to get the most productive sales force possible given limited resources.

On the other hand, everyone is a salesperson at least some of the time. You should decide on your role in the sales process and get good at it. Although sales is a skill that is natural to some, it can be learned by others. Most small business owners will not want to be involved in the front end of every deal, but maybe they will participate in the later stages of the sales cycle. Decide where you come in and get good at it. Learn from others the skills you will need, such as how to make a good presentation or how to go for the close. Be honest with yourself if help is needed, and recognize that sales is a complex profession that may be difficult to master right away.

Throughout this chapter, think about how your products or services fit into the market, and when and where it makes sense to buy. As discussed in Chapter 2, this critical determination is your Unique Selling Proposition or USP. For a small business, a well developed USP is all the more critical because most can offer only a limited range of items. Buyers are smart and will eventually understand where their best value lies, so sales efforts must target market niches where your company is most likely to win. Otherwise, large amounts of time and effort will be invested in deals where prospective customers end up saying, “Thanks for free education, but now that I have studied the market, I can see that your product is good but another is my best value.”

Sales Qualifying

Professional salespeople are extremely careful about how they use their time. There are only a few hours during the day to speak with potential new customers, and out of this must flow the sales to support an entire business. It is important to know in advance the characteristics of likely customers and focus on these opportunities. This is called sales qualifying.

Sales pros normally do this by constantly prospecting for new business and immediately qualifying for:

-Need. Is the customer buying what I am selling? Ask hard questions to learn what the customer really needs. If he or she requires widgets with blue buttons and yours have green buttons, then quickly move on, no matter how nice they are.

-Competition. To further understand the need, ask about the competition.

Who is in the deal, how far along has the process gone, does the prospect prefer a particular proposal, and why?

-Decision-Maker. Are you dealing with someone who can sign an agreement or a water carrier who only takes information to the boss? Worse yet, has the customer already made a decision but is dancing around with you because the boss upstairs requires at least two bids? (A frequent problem.)

-Decision Process. How does the customer make buying decisions?

Who is involved, what are the criteria, and should you make additional proposals and presentations to others within this organization?

-Budget. Learn what the customer expects to spend, and then make sure he or she understands where your small business fits into the market. If you sense that the customer cannot understand the value of your product or service, then quickly move on.

-Time Frame. Is the customer ready to buy soon, or just shopping around? It’s usually a bad bet for a small business to romance buyers and spend time educating them on the industry and market. Time is better spent directing efforts toward clients who are ready to buy now.

-Other Criteria. Maybe the customer will buy only from local firms, or big companies, or firms that sell widgets and 24/7 widget maintenance plans. Ask a lot of questions to decide quickly if you are wasting time.

In the end, most buyers are smart people and will make rational decisions. Sales professionals who are on top of the qualifying game make the best use of their time by weeding out time-wasting efforts and focusing on real prospects who can actually buy the products and services of your small business.

Stages in the Sales Cycle

Every product or service has a sales cycle, beginning with some form of introduction and ending with money in the bank. To properly allocate time and to structure sales efforts, the sales cycle for each small business must be thoroughly understood.

For some products, such as electronic devices sold on the Internet, the process is rather simple. The consumer “clicks around” with the following thoughts in mind:

•    Research. I want a Home Theatre System, but I don’t know the products; I want information.

•    Shopping. I know the features I’d like in my Home Theatre system, and now I want to shop around to see who’s got the best deal and the best reputation.

•    Buy. I know just what I want. I’m going back to buy and I hope everything goes smoothly as I choose the products and enter my credit card.

In this sales cycle, sellers do not want to speak directly with buyers because margins are thin and this would not be feasible. Internet-savvy Web-retailers direct potential customers to different pages of the e-store, depending upon the stage of the sales cycle, as indicated by keywords entered during the shopping process. For example, if a buyer uses a search engine to look for “Home Theatre System,” a link is returned directing the shopper to a list of the company’s products and its place in the market. But if “Bose GS Series II 3·2·1 Home Theater Progressive-Scan DVD/CD/MP3 Player” is entered, the shopper is sent right into the buy-page for this specific product.

For certain B2B (business-to-business) IT services, however, the sales cycle is dramatically different and much time is spent directly with the prospective customer. I once worked with a firm that expected a sales cycle something like this:

•    Prospecting (many calls to find the right contacts within the IT groups of potential customers).

•    Send letter and information.

•    Call for appointment.

•    First meeting. Objective: Qualify (as described above) and identify others involved in the decision-making process.

•    Meet with internal technical staff to discuss customer needs.

•    Schedule a technical call to resolve issues and build the relationship. Objective: Gather enough information to prepare a proposal.

•    Meet with marketing and technical staffs and prepare a proposal, presentation, and pricing.

•    Sales presentation to the customer (perhaps several presentations to different groups).

•    Meet with customer to learn any objections.

•    Request internal legal staff to prepare documents.

•    Meet with customer to review documents.

•    Arrange for counsel from both companies to resolve legal issues.

•    Sign agreements to close the sale.

Not surprisingly, a normal sales cycle here was six to 12 months. And even after the sale, the company had to deliver and install equipment, provide services, get customer acceptance, send an invoice, and wait for payment. This could easily require an additional six months. Fortunately, this firm understood the process and was patient with its sales force.

Small businesses must outline a reasonable sales cycle to estimate the length of time—and the overhead required—to close sales and generate revenues. Small business owners must decide at which stages their involvement is the most productive and stay away from the rest. Be careful, because many firms are overly optimistic when planning sales and revenues.

Structuring Your Sales Force and Channels

With all of this in mind, it’s time to figure out the best way to sell your products and services. Consider your ability to reach customers effectively and think about expenses, loyalty, and other issues. Many arrangements are possible, but most small businesses have limited resources and must choose only one or two sales avenues. Perhaps the best hint here will be to take a look at your most successful competitors. Chances are, the solution for your small business will be similar to that adopted by the competition. The most popular arrangements are described in the following section.

Direct Sales Force

Hiring and training an outside sales force is expensive and time-consuming. In addition, managing salespeople is always a little more difficult than managing other employees. They just require more maintenance. A direct sales force is targeted to selling your products and services only. Hopefully, they will not switch to a competitive product when the deal starts slipping away, which can be the case with agents, field reps, business partners, dealers, and distributors. Be prepared to design a commission system that is fair, competitive, clear, and legal in all respects (for example, paying employees “commissions only” is not legal in some states if the amount earned is less than the minimum wage).

A direct sales force is most needed in situations where long sales cycles are the norm, as with rather sophisticated products and services. Of course, the best candidates for this are college-educated, serious, and career-oriented individuals. Be prepared to pay a significant salary, because it never helps if a sales rep resigns when big deals are in the pipeline. On the other hand, good management is required because some direct sales types may become a bit too comfortable with the

salary and lose their thirst for commissions. I have said to many salespeople: “Your commissions alone must be at least $50,000 per year; if they are less, that means you are losing money for the company.”

Finally, great salespeople are oriented toward the near-term. If your products or services are not yet deliverable or competitive, don’t expect customers or salespeople to wait around.

Telemarketing

A telemarketing staff makes outbound sales calls to potential business (not consumer) customers. Telemarketers are a special breed, and I have a lot of respect for them. This is a profession within a profession; not many people can take the rejections resulting from 50 to 100 calls per day. Moreover, telemarketers often work for $8 to $20 per hour, which is relatively low. But, as always, you get what you pay for, so don’t expect too much from those at the low end of this range. Plan on paying a lot more in commissions to those who produce.

Telemarketing efforts must be directed toward products and services with a very short sales cycle. Many expect to close sales on the very first call to a potential customer and expect commissions by the end of the week. If your small business deals with longer sales cycles, consider paying a flat commission to a telemarketer for setting up an appointment and then assign the deal to someone else. The telemarketer gets paid regardless of what happens afterward since she has done her job and cannot control the situation once the prospect is reassigned.

Recruiting telemarketing people is difficult. My experience is that about 50 percent never show up for the first interview. Others will complete a training program and then quit without notice. Many have alternate lifestyles, and their real life lies outside your small business. As an example, I once worked with a middle-aged man who arrived at my small business and called like a demon and then went home to write movie scripts. He was polite, but he clearly told me that he had no interest in the products we sold. He was only in this for the money but would work hard on my clock. The situation worked because I respected his position.

For this reason, it is unlikely that your small business will get very far with just one telemarketer. There is too much turnover. Most successful telemarketing operations continually bring in groups of new recruits, train them, get them on the phones, and expect that half will quit within 45 days.

This situation can be mitigated with a pleasant, professional, and modern work environment (no smoke-filled boiler rooms); opportunities to be promoted to other positions; lots of perks and unannounced rewards (“We’re giving a $100 bill at the end of the day to whoever sets the most appointments”); a motivated, upbeat, and energetic telemarketing manager; fringe benefits such as medi- cal insurance; and respect from management. Of course, a hot call list resulting in lots of deals and commissions raises the morale for everyone.

Inside Sales                                                                                 

In contrast to a telemarketing staff, an inside sales group handles incoming telephone calls to book sales from both business and consumer-type customers. In smaller firms, they also handle customer service. Of course, incoming calls need to be generated through other marketing efforts, or your small business will be paying a lot of money to salespeople who only sit and wait for the phone to ring. Build into your budget sufficient advertising funds (perhaps through the marketing alternatives discussed in Chapter 4 or through Internet marketing, as discussed in Chapter 5).

Inside salespeople are usually paid a higher hourly rate than telemarketers but make less overall because commissions are lower. There is also less turn- over and less maintenance. Most inside salespeople want to learn about a particular industry and are more career-oriented than telemarketers. There- fore, it pays to invest more in training. Unlike telemarketers, inside salespeople are often encouraged to make their calls as short as possible to book deals and free up lines for the next incoming customer. Also, they must be articulate as well as cool under pressure and in the face of unpleasant customers. Many inside salespeople these days are college-educated and at the entry-level stage of their careers—but don’t discount moms, seniors, and others who are reentering- ing the workforce.

Unlike telemarketers, inside salespeople, do not need to be hired in packs but can be recruited as needed, because longevity is preferred. Once again, however, morale, productivity and longevity are enhanced by a pleasant, professional, and modern work environment.

Finally, when things get slow, don’t expect to turn your inside sales force into telemarketers. The personality types are not the same, and turnover will soon result.

Agents and Field Reps

Agents and field representatives (referred to as agent/reps) are not employees of your company but enter into a relationship where they receive the right to sell the products and services of your small business in exchange for commissions.

This is desirable in at least two situations:

1.      Your small business cannot yet afford a direct sales force.

2.      Your products and services require sophisticated representation in distant geographical areas.

Locating agent/reps may be a bit difficult. This process may be approached through Internet channels (such as Monster.com, CareerPath.com, DICE.com, and HotJobs.com), through contacts developed at trade shows and industry events, and through trade publications. Afterward, the process should be similar to that for recruiting any other employee (discussed in Chapter 6).

The agent/rep agreement normally requires no financial commitment on the part of your small business, but this can be a double-edged sword. On the one hand, these representatives must produce business to earn compensation. But on the other hand, loyalty can be an issue because agent/reps flow in the direction of the easiest money. If a potential customer tilts toward a competitive product after your small business has invested lots of time and resources into a deal, there is often nothing to stop the agent/rep from switching over to the competition.

Another problem is that some agent/reps load themselves up with far more products than they can ever sell. Their thinking maybe: “I understand and sell security software for a living, but just in case an important customer requests a relational database product, I will have something to offer.” For that reason, many small businesses require that agent/reps complete a training course on the product and then enter into an agreement that can be terminated if sufficient business is not generated. Some even demand fees for the training course to make sure the agent/rep is serious.

Note also that your small business has little control over non-employees. It is possible that agent/reps may make unrealistic promises and commitments and expect the management of your small business to make good on them. Loose- cannon types may also use your company name and logo in ways that bring harm to your small business. That is why many agreements allowing non-employee sales representation require that the agent/rep not represent himself as an employee of your small business. Nor may she make commitments to anyone regarding your company. These must all come from you. Many also require that the agent/rep indemnify the small business against associated problems.

Another issue concerns the legal status of the agreement. Small businesses must take care that the agreement emphatically states that the agent/rep is not an employee. Most agreements are laced with several special paragraphs on this subject, such as the following:

The Big Business Partner Deal That  Wasn’t

A friend of mine had a software company, “TDX Optimizer,” that specialized in a niche market. He had a great product, a clear-cut Unique Selling Proposition, and the deals were coming in from corporate data centers all over. His only competition was from a multinational computer products and services company, we’ll call Multi-National Megabyte, or MNM, which offered an inferior product.

At an MNM-sponsored trade show, TDX’s president excitedly explained to me how he was on the verge of closing a deal through which MNM’s sales reps from all over the world would now carry the TDX product. It seemed to make sense because customers were buying it anyway, and everyone felt it was a solid offering.

My friend thought he had MNM by the tail, and explained that he would sign the big deal tomorrow. There was just one catch: TDX could not sell to any current MNM customers (about 50 percent of the TDX market) for two years.

I was at the same trade show a year later and saw the president again. I couldn’t wait to ask about the big deal. It didn’t work out as he had expected. In fact, almost nothing was sold. As it turned out, MNM’s reps already sold over 1,000 different products and services, and TDX was not properly promoted to the hundreds of MNM reps all over the world. It just got lost in the clutter. Besides, with a typical sales price of $50,000 to $100,000, TDX licenses would be an afterthought in the big deals where MNM’s systems sold for upwards of $10 million.

But don’t worry about the big corporate users that needed an optimizer product—MNM sold plenty of licenses for their own second- rate product to these customers.

I didn’t ask my friend but wondered: Was it really an accident that the popular TDX product was put on ice, while MNM’s inferior optimizer now ruled the market?

The employee or contractor issue is important these days, and is further discussed in Chapter 6.

On a more positive note, agent/reps may have relation- ships with contacts that your small business will not get to for years. And if you’ve got a good product or service, then well-connected, knowledge- able, and respected agent/reps may quickly generate deals that would otherwise be un- reachable through other sales means.

Business  Partners

The business partner relationship is similar to the agent/ reps alternative, but the agreement is business-to-business. In this section, we are mostly interested in the arrangement whereby larger firms sells the products and services of your small business.

In this case, the small business usually has less control, in the hopes that the larger player will add its products and services to the Bigger Business catalog of offerings, and direct its much larger sales force to sell in obscene quantities.

This alternative should be played out only when simultaneously attempting to sell through other means. As always, success brings success, and if a potential business partner sees that your small business is already doing just fine,

it will make the deal all the better. On the other hand, if your product is still in development or not getting industry visibility, don’t expect much excitement from potential business partners.

A business partner relationship normally involves the upper management of both parties, and other parts of the sales organizations are typically involved only after the deal closes. The sales cycle may be very long, but the upside can sometimes bring small business into the big leagues.

Distributors and Dealers

Depending upon the product, dealers and distributors may be an integral part of your sales model. Distributors and dealers typically carry a wide range of products, including the competition, and have market reach not available to small businesses. Customers depend upon this extension of the sales channel to provide a robust range of products quickly and at low prices. The best way to determine if this alternative should be included in your sales efforts is to look at successful competitors. How do they sell? The answer for you is probably about the same.

The following can be expected when selling through distributors and dealers:

D Loyalty. Don’t be offended, but most distributors and dealers will be happy to add your product to their catalogs: If it sells, it sells; and if it doesn’t, it doesn’t. Don’t expect loyalty or hard selling efforts from distributors and dealers.

D Product Knowledge. Distributors normally utilize an inside sales force to sell their offerings; dealers may actually have face-to-face contact with customers. In both cases, sales efforts flow to the easiest money. If the distributors and dealers are familiar with competitive products, adding your offerings to their knowledge the base may be relatively easy. Expect to do a lot of promotion to gain visibility, or competitive products may be offered instead of yours.

D Promotion. If your small business expects serious revenues through distributors, expect to spend heavily to push and pull products through these channels, as described below.

D Pulling. Pulling is when your small business advertises and otherwise promotes products directly to consumers, who then buy through dealers and distributors. Always be on the lookout for opportunities to pull products through these channels, because trading partners expect vendors to make their phones ring.

D Pushing. In some cases, small businesses should consider hiring distributor reps who push products through D and D channels by visiting new and existing contacts frequently to announce new products and changes, for training, to make sure catalogs and databases are current, to resolve administrative issues, to promote special sales incentive programs, or just to take everyone to lunch. An experienced distributor rep with lots of contacts may quickly generate some big revenues.

D Volume Discounts. This is easy. Set up a schedule where D and D sellers get discounts as volume increases, such as “If shipments exceed $250,000, Seller shall receive a 1 percent discount on future purchases; if shipments exceed

$500,000, then 2 percent...” The program must be promoted, or some sellers will receive discounts without knowing it.

D Co-op Marketing Programs. Many small businesses offer special programs to dealers and distributors where extra discounts are given to sellers who send approved mailings to customers or place approved print ads. For ex- ample, one co-op deal may allow that

If dealers print their name in the designated area of this four-color brochure and send it to recent customers, our small the business will pay up to $2,000 by offering an extra 4 percent discount on all new products purchased for the next 30 days.

When this program is offered, be sure to have lots of marketing materials printed and ready to ship the same day, especially the four-color brochure.

Retail

Many small businesses begin as retail operations, where products are sold out of a storefront location. The pros and cons of such operations are reviewed here as a checklist for new businesses and for small businesses who currently sell through other channels and are contemplating retail:

D Expensive Overhead. Retail stores are relatively expensive because small business owners must spend heavily on higher rent, design, furniture and fixtures, computerized point-of-sale systems, back-office computer systems, and a great location. It’s often not feasible to keep significant inventory at retail outlets, so extra warehouse space may also be leased. Further, a solid, well-thought-out business plan must be in place because most leases require a three- to five-year commitment.

D Better Prices. Your products should fetch the highest possible revenues in a retail location. If other channels are currently in use—such as dealers, distributors, agents, or the Internet—check out the local retail competition, note their prices, and then set yours to about the same for walk-in customers. Expect some static when customers realize that the same product is available from your small business at a better price through other channels.

D Recruiting and Compensation. Cashiers in retail locations often double as sales representatives if they have a good knowledge of your products and perhaps those of the competition. It’s relatively inexpensive and easy to hire retail salespeople, and commissions should be considered if they can affect customer purchases. Check-out clerks, for example, don’t receive commissions because there is no customer contact during the buying process. How- ever, commissions might be considered for representatives of a light-materials

handling operation, because they often advise retail customers on the best configuration of parts for a particular need. As always, make sure that the compensation plan is congruent with the goals and Unique Selling Proposition of the company.

   Advertising. Depending upon your location and industry, heavy advertising may be needed. See how your competition and nearby retail locations have resolved these issues and consider doing something similar.

     Speaking of location, this and location and also location are critical in the success of small businesses engaged in retail sales. Sales will be a function of many factors, including population and demographics, local foot and car traffic, visibility, signage rights, competition, parking, location history, image, zoning and local restrictions, competition, interior design, and expansion alternatives. Choosing a location is discussed further in Chapter 10.

The  Internet

There is no avoiding the Internet these days, so every small business should have a Website to augment sales efforts, and many should also consider e-catalogs, e-commerce, and keyword ads, as described in the following section:

Website. Every small business must have its own Website. A Website validates your business and provides information critical to new customers, such as your Unique Selling Proposition (Chapter 2), business specialty, location, and hours. It also helps many other new customers find out that your small business simply exists! Setting up a Website is easy and inexpensive (as detailed in Chap- ter 5). Once the site is up, it becomes the foundation of related initiatives such as online catalogs, e-stores, and e-mail accounts. Your domain name should then be added to all marketing materials, such as business cards, brochures, and even the side of delivery trucks. The Website is heavily used by inside and outside sales reps when customers ask common questions or need information.

E-Catalog. A catalog in this sense simply means many Web pages describing the products and services offered by your small business; but customers cannot buy from a catalog—they must buy from an e-store (described in the following section. The e-catalog the option is especially relevant to small businesses selling complex, expensive, or regulated products, where on-line sales are not feasible but where customers want detailed product information. A distributor of pharmaceutical products, for example, cannot ship prescription drugs to unknown buyers. The same reasoning applies to products such as guns, industrial chemicals, capital equipment, and many others. In each case, it is not realistic to sell the product online, but the sales force will greatly appreciate the ease and speed of guiding customers to Web pages where detailed product information and de- tails are immediately available and can be reviewed on the telephone or in person. Perhaps the most important reason for a good e-catalog is that customer can no longer put off the sale by saying “Mail me some brochures, call me in two weeks, and we’ll discuss it some more.”

 E-commerce. E-commerce, through an e-store, is where products are actually sold on-line with little or no help from your sales force, and customers pay through credit/debit cards, PayPal, or similar electronic means. E-commerce continues to grab an increasingly large share of total retail sales. In 1999, e-commerce sales totaled $5 billion, increased to over $16 billion in 2004, and are expected to reach $316 billion by 2010 (Census Bureau, Forrester Research, ClickZ, as reported in Processor Magazine, October 2004, 4.) Many small businesses are finding the setup and operation of an e-store increasingly easy and affordable. The e-commerce alternative should be seriously considered because customers from all over the world may shop 24/7; the growth numbers cited above are compelling; and many small businesses believe this is the future. On the other hand, e-Commerce requires new methods of doing business and may affect existing sales channels. Many small businesses find that an e-store is a handy augmentation tool to supplement the inside sales force. The e-store at- tracts buyers, but many want to speak with a real person for a few minutes before entering a credit card and committing to the sale. The inside sales force or call-center can then fully explain products, convince customers to purchase more, suggest high-margin accessories, or work out expedited shipping arrangements. In any case, an inbound call-center and customer service desk is needed to augment the benefits of an e-store.

Search Engine Marketing and Keyword Ads. The rage in Internet marketing these days is keyword ads, having supplanted alternatives such as e-mail, banner ads, and the others approach. Keyword ads (also known as Adwords on Google and called various other terms elsewhere) appear when an Internet browser searches certain keywords. The search results include sites and articles of interest, as well as small advertisements. When browsers click the keyword ad, they link to the seller’s Website and hopefully then call or buy something on-line. Some firms have reported huge increases in business from keyword ad campaigns. Still, keyword ads can be expensive, and much time is required to maintain these programs.

Much more information on Websites and Internet marketing is provided in Chapter 5, which is dedicated solely to these subjects.

Channel Conflict

Be aware that success in selling through new channels may not please other parts of the sales and distribution network. For example, when small businesses open Internet stores and sell directly to the public, dealers and retailers are often unhappy because products may now be purchased on-line at lower prices.

This conflict exists on two levels: legal and marketing. On the legal level, there may be agreements in place between parts of the distribution channel that prohibit your small business or others from selling directly in certain areas, and this could kill plans to open new channels. Review existing agreements with your legal counsel to see if vendors or various resellers have a legal basis for objecting to the new plans.

On the marketing level, perhaps no legal agreement is in place but valued distributors simply object to being cut out of the deal. They may threaten to stop buying or selling products that are sold through other means.

In both cases, the management of your small business must weigh the risks and rewards to make a strategic decision and either terminate existing agreements and move into new channels, or hold off on opening new channels. Obviously, it may be difficult to cut off existing revenue-producing relationships in favor of promising but untested new sales channels. The decision may be complex and will vary with each small business, but a decision must be made.

The “Retail Store” That Doesn’t Want Customers

I recently helped a new small business set up operations and sell a popular electronics product. Sales mushroomed from zero to over $1 million per month in only 18 months. The company sold exclusively through three online stores and was set up as a call- center and shipping operation.

One day I noticed that overnight, the firm installed a cheap and badly designed retail showroom. A few products were on display among dozens of empty boxes, tape, and computer cables. It wasn’t pretty.

Did the company have aspirations of becoming a big retailer? Not exactly. A major vendor had apparently received a complaint from aa local retailer, who said that my client was selling products exclusively on-line (which was true), in violation of the distribution agreement that allowed for on-line sales only to supplement sales through a retail location.

Fortunately, there have been no visitors to the “retail location” so far: neither customers nor auditors from the distributor.

Selling to Government

Small businesses looking to sell to the government should consider separately efforts directed to the federal government and the state/county/city/local levels.

Selling to the Federal Government

The U.S. Government purchases products and services through the General Services Administration (www.gsa.gov). The GSA is thus the one-stop purchasing agent and business manager for the world’s largest buyer. Just in case you’re not sure if that’s big enough, note that the GSA acquires equipment, office space, supplies, and services for more than one million federal workers in more than 8,000 buildings in 2,000 U.S. communities.

The good news is that instead of contacting every U.S. government office that could possibly need the paper clips manufactured by your small business, just pursue the GSA. The federal government consumes incredible quantities of

just about every possible good and service—and the GSA is mandated to spread the business around by purchasing from many vendors rather than just a few heavy hitters, which works in the favor of small businesses. That’s good news.

The bad news is that even though the GSA has attempted to simplify its procurement processes for years, selling to the U.S. Government remains a special undertaking. Dealing with the GSA requires a significant amount of time and attention, probably unlike any other initiative ever attempted by your small business.

Also, pricing is cutthroat, so before commencing these efforts, small business owners must ask themselves, “Can we afford to offer these products to the federal government at the most competitive prices in our industry?” If your firm is not geared toward low pricing, then save yourself the time and stop now.

Notwithstanding these concerns, the GSA is seeking small businesses able to provide services and products anywhere in the U.S. and worldwide. All GSA contracting opportunities over $25,000 are advertised on FedBizOpps at www.fedbizopps.gov/. This Website allows vendors to register to receive e-mail notification of opportunities in specific business areas. FedBizOpps is somewhat similar to Monster.com or other job sites, in that buyers post their needs and requirements and sellers may respond with offers.

GSA contracts are managed by GSA headquarters and regional offices, while managers of federal buildings also purchase products and services.

Most small businesses, and even the largest of large businesses, employ special sales groups to deal with the federal government. That is because of the regulations, processes, procedures, systems, etc., put in place to consider everything from good pricing, to the “Reduced Greenhouse Gas Intensity of Electric Power,” to Section 508 of the Rehabilitation Act of 1973, to Amendments of 1998 [29 U.S.C. § 794(d)] requiring that the federal government acquire only electronic and information technology goods and services that provides for access by persons with disabilities. It takes a great deal of time to get familiar with all of these requirements, to remain in compliance, and to keep abreast of the constant changes.

If there is a strong desire to sell to the federal government, it’s best to seek outside help, probably by employing or contracting experts who are knowledgeable about dealing with the federal government, and, more specifically, with the products and services sold by your small business.

Another approach is to establish a close relationship with the “big fish” that can afford the long and tedious selling processes required to gain larger contracts from the federal government. Here, the strategy is to appear after the deal has been awarded, and the larger contractor needs products and services offered by your small business. Becoming a subcontractor to larger private businesses is usually an easier and more familiar process for small businesses.

Small business owners must consider if it is realistic to sell to the federal government. Access to the very best pricing and the ability and staying power to

deal with the GSA bureaucracy are the minimum prerequisites. Otherwise, at-

tempting to sell to the feds can be a time-consuming foray that ultimately does not bear fruit.

Selling to the State and Local Government

Selling to government at the state, county, city, and other local levels may be a bit less intimidating to small businesses. These situations vary widely from hopeless bureaucracies to informal deals that any newcomer can quickly win if the price is right.

The best approach here is to call government entities that use the products or services sold by your small business and learn if there is a current need. If the answer is positive, learn about the processes needed to sell.

In many cases, this will first require becoming an approved vendor. Approved vendor status usually means that your small business is properly registered and in good standing, financially sound, in compliance with local laws and regulations, and has signed a thick contract concerning everything from kickbacks to subcontracting to indemnification.

The advantage here is that approved vendor status normally allows small businesses access to databases or printed notifications of all upcoming business opportunities. This makes finding new business opportunities much easier.

Most purchases by government are managed through a formal Request for Proposal process, in which small businesses prepare a written response or price quotation and submit this for consideration. Selling (in the traditional sense) and presentations are less relevant, which may require a change in thinking at many companies.

Selling Internationally

Many small businesses suspect that their products would sell successfully outside the U.S. but feel that they should first exploit fully the huge domestic market before venturing outside American borders. Besides, selling overseas may seem intimidating because of unknown regulations, taxes, customs, competition, and pricing. And there are so many countries. Where to begin?

International selling may be easier than many small business owners believe, and there are ways of testing the market without opening offices in the major capitals of the world. Here are some alternatives:

•    Trade Magazine or Internet Site Ad. Buy a continuing ad in a trade publication or Internet site visited frequently throughout your industry. In the ad, offer to ship your product anywhere in the world, but require that the buyer pay for shipping, taxes, customs, and import fees. This is common. Expect to make a few telephone calls overseas in the

middle of the night. You will need a customs broker to deal with the foreign buyer and help figure out the fees and compute the total costs paid by the buyer, such as local transportation. Just handle the deals as they appear, and later see where the sales are coming from. You may be pleasantly surprised when contacted by a foreign distributor seeking a reselling relationship.

•    Foreign Distributor. Contact companies that are already selling related products overseas, and discuss whether it makes economic sense to import and resell your product through their channels. (Regarding the language issue, it’s not much to worry about these days: Just about everyone in business speaks English.)

•    E-Store and eBay. This is the easiest alternative and requires simply that products sold through your e-store allow for international shipping. Again, add language stating that buyers pay shipping and all other fees once the product leaves your location. If your small business does not yet have an e-store, try a few listings on eBay (selling a single product is acceptable on eBay, but an e-store must have many products). Once again, see where the business is coming from, and expand efforts accordingly.

The overall strategy here is to test the market and let buyers do the footwork in the various countries where your products may sell. As the business develops, consider reducing costs and expanding volume by contracting a sales representative or opening a sales office in the most productive overseas locations.

80/20 Rule

The 80/20 rule is one of those mysterious phenomena which seem to occur all the time in sales. It is worth mentioning here. Many small businesses notice something like this:

•    80 percent of sales are generated by 20 percent of the sales force.

•    20 percent of products generate 80 percent of sales.

•    20 percent of customers account for 80 percent of revenues.

•    80 percent of sales and marketing efforts are directed at 20 percent of the product line.

•    80 percent of the problems come from 20 percent of customers.

•    80 percent of profits come from 20 percent of the product line.

•    20 percent of your competitors are seen in 80 percent of deals.

Don’t be surprised to notice the 80/20 rule hard at work in your small business.

Tips on Hiring and Managing Salespeople

Salespeople require a little extra care and attention. Here are some tips on how to find the best people, build morale, point everyone toward the same objectives, and get better results:

D Measure Sales Objectives Against the USP. To meet business objectives, make sure that salespeople are measured by goals that tie in with the Unique Selling Proposition (Chapter 2) of the small business. Everything must be consistent. For example, if growth in revenues is the most important objective, tie compensation to sales volume and discount the importance of customer satisfaction surveys or units shipped. Of course, all this is important, but clarity in tying compensation to the USP will yield the best results. Sales objectives must be congruent with the USP and overall business objectives.

Manage Consistently. “Plan your work and work your plan” is an old adage that works well in managing salespeople. Once a plan is in place, be consistent about applying it to everyone all the time, under both positive and negative circumstances. This sends the message that personalities and politics do not rule in your small business, but results do. Everyone must see that the only thing that matters is results, and they must know for sure that certain results yield certain actions. Consistency also suggests confidence, and helps salespeople manage their efforts and set expectations.

Recruiting Salespeople. Where is the best place to recruit established salespeople? Why not poach from competitors? It’s an ancient trick to quickly pump up business. But be up-front about your expectations, and watch out for “non-compete” agreements, where your new sales star may have signed an employment contract with a competitor stating, in part, that the departing employee may not call on certain clients for a period of time (usually one to five years) after leaving. Such agreements are difficult to enforce but may still get in the way.

Hire 5; Get 1. The 80/20 rule at work again. Sorry, but that’s about the ratio of successful hires to duds. Both employer and employee may try as hard as possible to make the relationship work, but most of the time only one in five salespeople really produce. (Of the other four, one or two will barely meet expectations, and the others will be on a downhill slide from day one.)

You Get What You Pay For. Expect to pay serious money for good salespeople. Remember that more than anyone, salespeople are money-motivated.

Meet Frequently and Manage Consistently and Closely. It’s a good idea to hold weekly meetings with all salespeople to learn what they are selling, to whom they are selling, and how they are spending their time. If things are going in the wrong direction, sales management must act quickly and decisively to fix the problem. Otherwise, no one will be happy when sales efforts are terminated after much time and expense.

Big Commissions for Bad Business. Related to the aforementioned topic, creative salespeople may be leading the company into the wrong kind of business, when loopholes are found in the commission agreements. Sales managers must be prepared to referee situations where, for example, two people are chasing the same deal, or where a new salesperson calls on a forgotten ac- count of a more senior rep.

Compensation Agreements. Be prepared to spend considerable time designing and writing the sales compensation plan, and especially details on salary, commissions, and bonuses. If a mistake occurs and an eager salesperson wants commissions for something that wasn’t really considered, it’s okay to change the agreement but only after the commissions are paid in full. One way to limit this problem is by placing caps on commissions. Good salespeople are difficult to find, and a good way to lose them is through unclear and frequently changing commission agreements.

Perks are ’Preciated. Salespeople these days are motivated by commissions, but other perks are appreciated as well, and money spent in this direction may buy a lot of goodwill and loyalty. Consider the personalities of your team members and the importance of building a collegial environment where everyone enjoys coming to work. Here are some ideas to reward top performers and motivate everyone:

-Entertainment event attended by everyone making quota (sports event, monthly awards dinner).

-Primo parking space

-Dinner with the boss

-“Salesperson of the month” plaque and photo mounted in a prominent place

-Article and photo in company newsletter and Website

-Newer offices and computers go first to top performers

-The company pays for an educational course

Some of this may seem cheesy at first but look around at all the other businesses successfully employing these motivational tools. Build fun and recognition into the lives of your salespeople: It’s often cheap and easy. A a couple of final notes, however: Perk plans must have minimums. The deal is off if the company normally sells 100 units per month and then sells 50 units in the first month of the new “basketball game with the boss and top five producers perk plan.” Also, make sure that these programs serve to bring the group together and are not divisive. This will depend upon your small business and the personalities involved.

Having said all this, be prepared to “weed and seed” your sales staff quickly.

Tell recruits before hiring that they have a certain amount of time to achieve

predefined results; if the numbers don’t come in, it’s over (for example, “I need to see you working on three good deals in the first 30 days, and close one sale in 60 days.”). Sales managers must then stick to the plan to maintain credibility, and because it’s the right thing to do.

Just Don’t Ever Stop Selling

Success in sales is an ephemeral victory. For the moment, everything seems easy. One deal follows another, and the successes become bigger and bigger. But small business owners can never relax. Other entrepreneurs see your success and are tempted to enter the same market. Success attracts larger companies, too, who could not be bothered when the numbers were smaller. Competitors are not standing still either. The market continues to change, and customers have new alternatives. It’s only a matter of time until change hits home, affecting your small business.

For this reason, it is imperative that sales efforts never cease. Small business owners should always examine their products and services; keep track of the competition, selling channels, and methods; and watch the markets to learn the best way to keep reinventing the small business and remain competitive as the world moves on.