Structuring a High Tech Sales Force

There are many ways to organize a sales force for a software or hardware company. In my opinion, there is no one “right” way. There is only the BEST way for the unique circumstances of your current company.

Like most aspects of developing a technology-based company, there are guidelines. But, there is no exact road map to building a successful sales force. In my consulting practice I often suggest that a management exercise like structuring a sales force should begin with a series of questions:

What stage of development is your company in?

This is important, because an early-stage company may not have the resources to fully fund an outside sales force. Even if that may be ideal for its particular product/market situation. Or the company may want to sell primarily via an inside sales force. But it hasn’t had enough early success, or nailed down the sales process sufficiently, to sell effectively through this less “high touch” method. But at this stage, every sale may need to be higher-touch than an inside sales force can provide. So this may require an “all hands on deck” approach. One that requires participation from senior personnel even outside of the sales force structure.  So stage of development can be just as important as what the ideal “steady state” organization will ultimately look like. When designing a current sales force structure, don’t overshoot your development stage in designing your sales organization.

What are you asking your sales force to do?

Are you using your sales force primarily as closers, supported by strong marketing, etc? Or will your sales force be doing a lot of cold calling, handling the customer “cradle to grave”? In general, the more you are asking your sales force to do (less marketing), the more “high touch” the structure needs to be.

What markets are you targeting?

In some markets (such as many enterprise market segments) an outside rep “knocking on the customer’s door” (at least figuratively) is expected by some customers and is therefore essential. In other markets (like many SMB markets), this type of attention may be considered a nuisance, rather than a service. It’s important to understand what the target customers want in a sales interface.

What are your product price points?

The implications of this question are usually well understood. Higher-priced products can support a more expensive outside sales force, and may indeed require one to make the sale. Lower-priced products can’t usually be sold profitably this way, except as an “add-on” product. So an inbound or outbound telesales operation (possibly in conjunction with 3rd party channels) is often the optimal structure.

Is your product more of a commodity sale or is there a longer, more complex sales cycle?

Commodity products lend themselves to lower-cost inside sales structures, as well as greater use of channels. The more complex your sales cycle, the more likely your company will need a captive, outside direct sales force to serve at least part of your target market.

This is just a sampling of key questions to ask yourself as you design your sales function. There are many more relevant questions that should be asked, depending on the specific situation. I won’t attempt to cover them all; otherwise, this article will become a book. Once you’ve done a good job of asking and answering the relevant questions, it’s time to start designing your sales organization. Below are some of the personnel types and organizational structures that a software, SaaS, or hardware tech company would typically consider as part of its sales organization:

SALES FORCE REP TYPES

Outside Reps

This is the classic sales rep style that has been around nearly since the beginning of time. In the “old days,” even consumer products were often sold this way! Those of a certain age can remember the “door to door” Fuller Brush Salesmen. It’s hard to believe today, I know :-) But the outside rep is the most expensive form of salesperson. Depending upon the market, products, and other factors, it is not always the most efficient or even most effective.

However, there are still a lot of companies that sell almost exclusively through outside direct sales forces. But in many companies where direct outside sales reps do exist, they are often used more sparingly. Often, they’re reserved for specific situations such as the large end-user accounts and OEMs. They are often used in combination with other, less expensive types of reps and channels to cover the entire target market most efficiently.

Inside Reps

This is a favorite form of sales rep for commodity products. They are also popular in companies that sell heavily through third-party channels and other inexpensive, higher-volume products. However, keep in mind that every situation is different. A non-commodity enterprise SaaS product that has been optimized for ease of use may do very well paired with an inside sales force. Inside reps can also be used effectively in a “teamed” approach with outside reps. This can help to optimize the overall coverage of a sales territory. In this role inside reps may source or qualify leads for the outside reps, handle smaller accounts in the territory, or generally act as a “junior sales rep” to the more senior outside reps.

Sales Development Reps (SDRs) and Business Development Reps (BDRs)

These are inside sales reps who specialize in sales prospecting. They don’t close sales but pass qualified prospects down the sales funnel to be closed by others. The term SDR originally came out of the SaaS business but has spread to other types of companies.

Hybrid Reps

This rep type is more or less my own invention (the term is at least). This sales rep is part outside rep, part inside rep. A rep of this type would be appropriate for those “tweener” products and markets. Those that don’t fit neatly into a pure inside or outside model. For example, software products with an average sales price of $1-10k. Products too low cost to be sold strictly through an outside sales force, but may be too complex or expensive for a pure phone sale.

Hybrid reps spend most of their time in the office on the phone. But they also travel modestly, maybe one trip/month or two. Some example “core” reasons for trips might be to staff trade shows, visit channel partners, and call on major accounts. They would then fill up the rest of the week with additional sales calls.  This type of rep may be very appropriate for early-stage companies that can’t yet afford to build out complete inside and outside sales organizations.

One of the advantages of this type of role is employee retention. Sales is a mentally difficult job under any circumstances. The role of a pure inside rep is one that is particularly challenging. Spending a full day on the phone and behind a computer, often reaching out to “cold” prospects can be draining. This hybrid role can help alleviate some of that inherent boredom and mental strain, preventing burnout.

Sales Managers

This is pretty self-explanatory. But not every software or hardware company can afford a classical, full-time sales manager. Often you will see individual reps reporting to a manager of another function in early-stage startups. Occasionally you will see the concept of a “producing sales manager”, one who has an individual sales quota in addition to management responsibilities. The sales manager personnel type is very important to set the tone for your sales organization. It applies to managing all rep types within any organizational structure.

Sales Administrator

A specialist that you tend to see in larger sales organizations. Or at least those that have a lot of complexity, such as a lot of return activity, inventory management, repairs, rep splits, complex/custom contracts, etc.

SALE FORCE ORGANIZATION TYPES

All of the organizational types listed below can each be commonly found as a dominant sales organizational type in a variety of technology companies. They are also seen in combination with each other as well in larger, more complex companies:

Region-specific organizations

This is probably the most common sales organizational structure. It may include any of the sales reps types listed above who are assigned to specific territories. In many cases, I favor this arrangement. It tends to be the most unambiguous to measure and manage. The downside is that certain regions can prove to be much more naturally fertile than others. This can make the management process more difficult to perform fairly among the reps. If you give a more fertile territory to one rep over another, he/she is going to make more money and be happier than their counterparts in less fruitful regions. You also may lose the advantages that certain reps have in terms of contacts or market knowledge that lies outside of their assigned geographic region.

Channel-specific organizations

This is the second most common sales organizational type. It of course tends to be found in companies that make strong use of third-party sales channels. There may be a direct sales force, a VAR or retail sales force, an OEM sales force, and so on. Sometimes there is an “intermixing of these organizations, for example, an “overlay” VAR channel rep as part of a direct sales force.

Industry-specific organizations

Likely the least common of sales organization types, but one which is very appropriate in certain circumstances. For example, it might be found in a tech company that has very different value propositions in many vertical industries. In some vertical industries “insider status” is important to selling into that particular market. It is also seen in companies where the product offerings are arranged by vertical market.

SALES FORCE STRUCTURES SUMMARY

There are many possible sales organization types and styles for software and hardware companies. None is perfect. Many different ways of organizing a tech sales force can work. Please note that the people you put in the organization are always more important than the organizational structure to your company’s ultimate success. So carefully consider your company’s specific situation. Match your organizational structure to your market, products, and available resources. If you follow this playbook,  your company will have the best chance of achieving optimal sales results.

What do you think is the optimal way to organize a tech company sales force? Post a comment with your perspective on this important topic.

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