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Many organizations are new to outsourcing and are understandably hesitant to relinquish control over vital operations. Sometimes the CFO is called upon to review contracts, calculate the numbers and, in general, give an opinion on whether outsourcing would be a solid business decision, in the short and long term. For this reason, I write this article to clarify some points that go beyond the financial perspective.
PRICE
Cost reduction is one of the main benefits of outsourcing, and the first area must be evaluated. In addition to salary and benefits, it’s important to add in all the HR costs associated with hiring, recruiting, and training a new employee. These costs can be nebulous for many organizations, spread across multiple expense categories. When added together, the cost of a single sales rep is typically double their base salary.
Depending on the partner, outsourcing can represent a significant price reduction (although I would caution you against choosing a partner based solely on the lowest price). The goal is to reduce overall costs while maintaining quality, as well as simplifying the accounts payable process with a single invoice instead of dozens across multiple departments.
REVENUE PREDICTABILITY
When outsourcing a function like sales, you need to consider the significant impact of revenue forecasting. When do you need salespeople to become productive to meet revenue goals? If that deadline is sooner rather than later, outsourcing is likely the more attractive route because the ramp time can be 66% shorter. You can also expect scaling to be faster and easier when working with an Outsource partner, as they can add resources to your account in a matter of days or weeks, compared to recruiting cycles that last months.
When making predictions, it is preferable to deal with facts rather than assumptions. While Outsource sometimes promises higher quality than your in-house team, you need to use your existing sales reps and their productivity as a benchmark. If my vendors are bringing in 10 leads per month each, and we assume the Outsourcing reps can meet those numbers within a month or two of Onboarding. If it surpasses these numbers, it will be a welcome surprise.
CONTRACT
Contract terms are extremely important when deciding between different outsourcing providers. One of the first things you should look at is the success rate or performance. How does it compare to our internal variable compensation and how does it affect the third-party provider’s overall cost? Is the outsourcing company looking for a success rate for every meeting scheduled or for every deal closed? The next items to be evaluated are the contract end date and renewal terms. Is it something you need to plan for 3 months, 6 months or a year? When can you give notice? Do any of the terms change upon renewal?
Sales Outsource agencies can vary significantly when it comes to contract terms, and there are likely details that you didn’t have a chance to discuss during the sales process. Make sure you’re comfortable with the final product before jumping in, even if it pushes your start date back a week or two.
Outsourcing, when worked with the right partner, can provide incredible value to organizations across a wide range of industries. For organizations considering outsourcing for the first time or deciding between vendors, schedule a consultation with our team to learn more about our approach and our client success stories.