How Outsourcing Saves

Outsourcing your lead generation can enable you to improve the productivity of your sales team by a factor of 5 or more. That means you can reduce the size of your sales force, save money, and increase your sales at the same time. The question is: How?

The breakage problem refers to the tendency of a salesperson to get into a pattern. This is usually associated either with working with customers (to retain or upsell them,) or with warm prospects (to close them,) but most of whom are people who he already knows. Breakage occurs, however, when the salesperson has to change gears and talk to people who he doesn't know -- i.e. cold prospects. This requires getting into a different mind-set. Some salespeople gird themselves for battle. Some psyche themselves up for rejection. And others go reluctantly into the fray. But it always requires a change in attitude that takes time, a mental gyration, and a change in work pattern, to make. It is this change that introduces inefficiency - often a 20% to 50% or greater reduction in productivity.

Asking salespeople (i.e. those who do not already cold-call 80% of their time or more,) to stop what they're doing and start prospecting reduces their effectiveness and efficiency in both tasks dramatically. If, however, you give the task of generating leads to a telemarketer, that same salesperson will close twice as many sales, or more. And one telemarketer can support anywhere from 2-10 salespeople, depending on the product, for a savings of 20%-40% of your total sales budget, while increasing sales by 50% or more.

Assuming that you agree that the breakage problem reduces overall sales productivity, but given the necessity of finding new business, why is outsourcing necessary? The answer is that the skills needed to make effective cold calls are both specialized and rare. Years of recruiting and testing have shown that less than 5% of respondents to a telemarketing job ad are qualified to do the B2B job - assuming you even know what to look for. So the chances of you finding someone who's qualified are, essentially, zero. And if they leave, your chances of finding a qualified replacement are zero.

But assuming that you decide to try, the cost of recruiting, selection and training are very high. Running ads online or in the local paper will cost $300 or more per run, and typically upwards of $2,500 before you get enough candidates from which to choose someone who's qualified. Hiring a recruiter will cost $5,000 or more, and will generally leave you without enough qualified candidates, since they don't know what to look for any better than you do. Most companies typically take three months to train them, at $2,500 - $3,500 per month, before they realize it's not working, resulting in over $15,000 in expense with nothing to show for it. Outsourcing, however, can generate new sales for half the cost of recruiting an in-house telemarketer, saving $7,500 or more, while generating hundreds of thousands of dollars in new sales from day one.

The other big problem is the strategy problem. Most companies know how to sell their product once they get in the door. The problem is that most companies don't know how to get in the door.

Developing an effective prospecting strategy typically involves paying a marketing consultant $30,000 or more; and most of the time all you get is a binder, not implementation. Outsourcing your telemarketing saves you $30,000, and actually produces leads.

Let's say a company has 5 salespeople, each at a loaded rate of $60,000 per year, and does $5M in sales, with $3M coming in the form of new sales. If you replace one of those salespeople with an outsourced telemarketer, the remaining four salespeople will almost double their sales -- adding over $1M in incremental sales while saving over $100,000.

You can see this effect on your own team with this model.