First steps

First step

Now let’s imagine that we are dealing with a business organized by the will of a single individual. He does not have the ability to divert funds from operations to create a powerful distribution system. His entire business operates on his initiative; he may even have a small administrative staff, accounting, or even managers who service existing clients. At the same time, he searches for new clients himself, negotiates with them, closes deals, and provides ongoing service. He also makes all key decisions personally.

The model described above is applicable not only to a “personal” business but also, for example, to the operations of a department within a large company or a branch office. In this case, we are talking not about an entrepreneur, but about a branch manager.

In this situation, two obvious scenarios are possible:

• The businessman spends the lion’s share of his time searching for new clients, which negatively impacts his existing ones. As a result, the most effective way to spread information about his products—through recommendations—fails to work, and old clients gradually leave. This turns the businessman’s efforts into a constant struggle to keep a leaky balloon inflated.
• The businessman spends most of his time with existing clients and has a reputation as a reliable and recommended partner. However, over time, he stops taking on new clients because he simply can’t find the time for them.
• One specific case of the second scenario can be considered a situation where a businessman works almost exclusively with a single client, whom he acquired through connections, acquaintances, common shareholders, or by chance. This client is significant and essentially sustains the businessman’s business, but the businessman understands that he needs to seek new clients, as such a fortunate situation cannot last forever. Often, having such a client is a decisive factor in determining whether to start a business (a branch of a large company) or not. In other words, the client appeared before the business itself.

It’s clear that the second scenario is more preferable, but we will assume that the businessman wants to earn more money and start thinking with him about how to increase sales and attract more clients.

“Meaningful Deputy”

The first idea that comes to a businessperson’s mind is to hire a “capable sales assistant.” The businessperson thinks, “Let him handle the sales, and I’ll give him half of what he earns.” This way, the “boss” manages the back office and takes care of existing clients, while the “capable assistant” develops the business. However, this seemingly brilliant idea has several unpleasant aspects:

• Key decisions are still made by the businessman personally.
• “The explanatory manager” is not interested in maintaining relationships with clients and is only after new clients for commissions; they don’t treat the business as their own.
• A business that brings such a “competent deputy” doesn’t always align with the company’s profile, and the businessman believes that the root of the problem is the deputy’s lack of expertise in this specific industry. He starts to teach him what is good and what is bad.
• The businessman doesn’t fully realize what kind of relationship he has with his “capable deputy.” In reality, this “capable deputy” is essentially just a “sales channel,” meaning another client. And we know that the businessman has already reached his saturation point.
• “Let him sell” never works, and even a “competent deputy” requires a lot of time and attention, as he is expected to bring in at least 25% of new sales, if not half. What kind of relationship should a businessman have with a client who accounts for 50% of his business? And does a football coach for the “World Team” even need to exist? Does the businessman have time for such work—training and supervising his deputy?
• What if this so-called “smart deputy” leaves and starts their own business? What do you mean “if,” when this scenario is a daily reality? In any business, sales are the most important thing. Without clients, there’s nothing—no accounting, no back office, no office at all. And if there’s an opportunity to work with an already established client portfolio, why not start working for yourself (or leave to become the director of a competitor’s branch, or even “undermine” the boss), putting on a big “Commander’s Hat”?

The idea of bringing in such a “capable deputy” as a partner is not considered, as the businessman won’t earn more money from it; on the contrary, he would have to share the fruits of his hard work with someone else. The economies of scale simply do not apply in this approach.

Group of sellers

After losing a couple of such “capable managers” in his life, along with some clients, the businessman comes to the second logical conclusion that a “capable manager” is a liability and that he needs to create a sales department with 4-10 simpler employees who are unable to separate themselves and who will “sell.”

A businessman might come to the idea of hiring several salespeople simply by understanding the logic that the more salespeople there are, the more clients there will be. And if the salespeople work on commission, then having such a sales department, at first glance, does not incur any additional fixed costs.

Moreover, a savvy businessman won’t rely on a single seller, as the scenario of separation is so predictable that it cannot be overlooked.

So, we have a company with several salespeople, a part-time accountant, possibly an office manager, and the business owner himself.

But something isn’t quite right. Yes, the company has grown, but it hasn’t become more efficient. To understand why this is happening, we need to figure out who is doing what in this firm and who should be doing what. They should be focusing on the following:

Sellers

• To seek new clients.
• Serve existing clients.
• To sell

Leader

• All work related to back-office operations.
• Sales training
• Hiring salespeople
• Monitoring of sellers, including tracking their relationships with clients.

A very serious problem is that salespeople generally lack selling skills. Business owners, remembering the idea of a “capable deputy,” tend to hire less qualified individuals, offering them the same commission-based compensation with the same “split” concept and no salary. Who would take such a job? Right—someone who has no skills, is currently unemployed, and thinks, “maybe it will work out.” As a result, the average lifespan of a salesperson in a company doesn’t exceed a year. And if that salesperson is good, they gradually become a “capable deputy,” with all the consequences that entails.

From a manager’s perspective, it seems like a crime to hand over existing clients to incompetent salespeople. Instead of working with the sales team, he continues to serve his clients himself. Moreover, if the phone rings in the office, he is the first to rush to answer it, eager to sign up a new client for himself and save on commission for the salespeople.

In fact, if a person has taken on the role of a sales manager, they should dedicate all their time to managing the sales team, rather than focusing on back-office tasks or existing clients. Of course, keeping an eye on clients remains the manager’s responsibility; however, progress in the company’s performance will only be achieved when the business owner shifts from the role of a salesperson to that of a shepherd or a coach for the sales team.

What we give and what we take

To understand why a “good manager” leaves and why salespeople are not performing, it’s important to realize that salespeople are not just workhorses or free resources; they are clients too. In order to gain something from them, like new business, you need to offer them something in return.

What can a manager provide to salespeople?

• Training is essential, provided that the person knows how to sell. They should understand the sales cycle and be proficient in the techniques for each stage, from cold calling to closing the deal. They should be familiar with sales methodologies and be able to teach all of this effectively. Training includes classroom sessions, client meetings, skill demonstrations, addressing specific challenges that salespeople face when interacting with clients, and conducting “debriefs.” Unfortunately, most business owners lack sales skills, just as they often lack accounting skills. Additionally, these business owners typically do not possess training skills either. There are two ways to address this situation: either invest time and effort into learning skills that the business owner personally does not need, since they have salespeople, or hire an external trainer, preferably one with their own sales experience. When negotiating with a trainer, it’s important to clarify what the trainer considers to be an ideal sale and what characteristics define it. After the training, all salespeople should take an exam. If the majority of them pass, the trainer receives their fee.
• Control and Reporting. It is important to understand that any control should be structured in a way that makes the salesperson interested in it. Control should not simply reassure the business owner that the salesperson is not just playing games on the computer, but is actually reaching out to clients. Unfortunately, most business owners use reporting and control as a negative motivator, or rather, a demotivator. In reality, reporting should function as a detector of the salesperson’s weak points that need improvement, as well as a means to identify specific skills that need to be developed. Even the best athlete needs a coach, the most famous actor needs a director, and the top salesperson needs a manager. Where can someone who has been running a business largely on their own acquire the skills for effective people management? This issue, like the previous one, can also be addressed by temporarily hiring someone with management experience. Alternatively, you might not need to hire someone; you could seek friendly assistance from a more successful classmate with whom you have maintained a relationship and who is genuinely willing to help you. In the next chapter about the role of the manager, we will discuss what should be included in reporting, what should not, and how often to request reports.

In an environment where the sales manager treats salespeople like clients, offering them something valuable in exchange for their work, no one will even consider separating and starting their own business. It will be clear and obvious that it’s impossible to earn more by working alone, especially in the first couple of years. The role of a “coach” will be seen as invaluable, and without such a coach, success is unlikely. In this mode, the effects of scale and the “separation threshold” come into play. With several salespeople who are constantly trained and monitored, it’s possible to reach new business volumes while maintaining a well-diversified client portfolio evenly distributed among the sales team. Additional funds can be spent on advertising, a new, more respectable office, scaling up production, reducing the cost per unit, and engaging in price competition with rivals, which will lead to even greater sales growth. Each salesperson trained by you won’t even think about starting something “on their own” simply because they understand that they would have to compete with you, who has more resources, lower prices due to economies of scale, and better experience. Moreover, you are the teacher, and they are the student. If they do separate, it’s far from certain that they will be able to take your clients with them. You have a reputation, while they have an empty office. Even if they manage to take someone, it won’t be a drama for your business, as you have several such salespeople.

In fact, by training and supervising salespeople, the businessman has created a product that he “sells” to the salespeople just like he does to customers. Recognizing this and consistently promoting this product to his internal clients—the salespeople—is the key factor for success in building a business that will be more competitive compared to those run by “one-man bands.”

Another important aspect of a sales manager’s job is recruiting or hiring salespeople. No matter what we do, salespeople will always leave the company. If they are not trained, they won’t be able to sell and will become frustrated; if they are trained and are capable of learning, they will grow and will want more. There will always be a competitor eager to poach your salespeople. There will always be a particularly savvy salesperson who will decide sooner or later to start “something of their own.” A sales manager must constantly be aware that turnover among salespeople is a natural phenomenon. It can be managed to some extent, but it cannot be completely eliminated. Moreover, if during the search you find a salesperson who is better than your current ones, why not replace the weakest member of your team with the best? A significant amount of time and serious effort should be dedicated to recruitment, setting daily tasks and goals, and achieving them. Even when you have recruited the maximum number of salespeople, which can be easily calculated, you still need to work proactively on hiring to have a ready pool of candidates to replace anyone who leaves. Every businessperson will spend a considerable amount of time and make numerous hiring mistakes before realizing who is truly capable of being a salesperson, who is worth training, and who will bring in new clients. How can you speed up the hiring process for salespeople while ensuring the quality of your hires and quickly starting the business growth you envisioned? Again, this can be addressed by using external resources. However, it is advisable not to turn to recruiting companies, as they typically do not understand what a qualified salesperson should look like. For such purposes, there are sales development consultants.

Maximum number of sellers

The resources of each person are limited, and it is quite clear that a sales manager cannot physically manage a number of salespeople that exceeds what is feasible for that manager. How can we calculate this maximum feasible number? Based on the manager’s tasks:

• training
• control
• Rental.

Of course, at the initial stage, the time allocated for hiring salespeople should be greater than the time spent on training and supervision, because there is no one to train and supervise yet. However, even at the saturation stage, it is still necessary to dedicate time to hiring for the reasons mentioned above.

If you need to meet with an existing salesperson and a client at least once a week, spend at least an hour a day in one-on-one conversations, hold a training session for everyone at least once a week, and have a meeting at least once a week. If you need to conduct two recruitment interviews a day, which requires contacting 20 candidates. If you need to review sales reports and take necessary actions, and if you also have to deal with other tasks besides sales, such as administrative work, then it’s unlikely you can effectively manage more than five people. If you focus solely on managing salespeople, the maximum you can handle is nine. On one hand, the more people you have, the more effective group training can be. However, the more people there are, the higher the likelihood that one of them will leave in that particular month.

If you encounter situations in your career where a manager has more than 10 salespeople, even fifteen or twenty, it’s important to understand whether they are actually selling or just “sitting at the cash register.” You should consider whether they truly need a manager—does the manager lead them, or are they simply using the company as a resource to earn commissions from clients they bring in by just being at the gates? For example, a school principal who is also an insurance agent earns a commission by leveraging their administrative influence to make all the parents buy insurance, effectively poaching their personal income. Such a salesperson is not yours; rather, they have chosen you, and if someone offers them more, they will switch companies immediately.