The “this” that I’m talking about is the practice that I’ve seen MSPs and IT consultants repeat many times. Tragically, each repetition costs the MSP and/or IT consultant a ton of cash. The behavior that I’m talking about is the result of success that the MSP has had. Ironically, the more successful small MSPs are, the more rapidly they want to grow, higher more engineers, and enjoy more recurring revenue.
In their effort to grow their practice, they make the erroneous conclusion that they need to hire a salesperson. It is an erroneous and extremely expensive conclusion to draw. You see, the small MSP or IT consultant sells based on the amount of knowledge and expertise that they bring to every client’s situation. The more knowledgeable they are, the more contracts they get. The more contracts they get, the more recurring revenue they enjoy.
Now, their practice is at a point where they are handling as many clients as they physically can handle. There’s just not any more room in the day for one more client. They will then embrace the approach of hiring a salesperson. Here’s what happens next.
After the decision to hire a salesperson is made, the MSP starts promoting the fact that he/she is looking for a salesperson. Ads may be placed on job boards, in newspapers, et cetera. Sooner or later, several people will show up at the MSP’s office claiming to be salespeople. Unfortunately, the MSP will make the hiring decision, more often than not, based on personality and not based on the ability to sell.
Now, this decision is about to cost the MSP half a million dollars! That’s right; according to The Wall Street Journal, every time a salesperson is hired who fails to achieve his/her goals, he/she will cost their employer (a.k.a. the small MSP) $500,000 in ruined potential future revenue. So, let’s proceed with caution.
Getting back to our scenario, the new salesperson is hired and he/she demands a salary that is much higher than the MSP would like to pay. Many MSPs feel that they can get high-quality salespeople on a commission-only basis. Commission-only comp plans do not attract professional salespeople. That’s a fact, except in investment and insurance industries.
So now, the cost to the MSP to keep his/her practice afloat has gone up significantly. The only way that MSP can generate the incremental profits to pay for the salesperson is to get more clients. But, as noted above, the MSP does not have the bandwidth to bring that person on board. So now, a race begins. The race is to get to positive profitable cash flow before the MSP runs out of cash and/or patience.
When the MSP asks the salesperson “How are we doing?”, the salesperson will more often than not answer in vague but positive terms. Sooner or later, the MSP will run out of money and patience and terminate the relationship with that salesperson. So, let’s stop the madness. If you’d like a copy of my e-book How to Recruit and Hire Sales Superstars, please click this link and in the subject line of your email indicate “Hire Sales Superstars”.
A much better strategy, especially for the small MSP and/or IT consultant, is to engage the services of a marketing organization to generate leads. You see, the core mistake is that the MSP hires the salesperson, expecting the salesperson to generate his/her leads. Lead generation is a process that is far more challenging today than it has been in even recent times. There are many reasons for that circumstance to exist, which I’ll go into in future articles.
But, for the time being, make sure that you have a funnel full of opportunities before you hire a salesperson. This will give you and the new salesperson the ability to see “cash flow daylight” sooner rather than later. And that, in turn, bodes well for all members of your team. As always, I wish you…
Good Luck and Good Selling!!!
Sales Acceleration Coach
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