The BIG cost of selling to SMALL Businesses

Every few weeks I get approached by someone who has invented the next big thing for small business owners and they’re looking for a sales force.  They know their product, they’re excited, now they need someone to go close the deals.

The company where I work currently has a sales team of 200+ local media reps that sell combinations of directory advertising, Text Marketing, and are expanding to include mobile websites and essential listings management.  These are pavement pounding, through the door reps that shake hands of working men and women in small town America.  These reps are my heroes because they live outside of their comfort zone.  They make the sales happen.

This team will make more than 1 million in-person sales calls on local businesses in their assigned territories around the Midwestern United States each year.  The businesses they serve make hundreds of millions of dollars in sales because of the customers our products deliver.

It’s hard work that keeps our communities close, and cash registers ringing.

My phone rings with a technology inventor looking for a sales team.  The call goes like this.

Technology inventor, “Hey Dick, you’ve got a big sales team.  Maybe your team would like to sell our gizmo/service/online advertisement.  They can simply add it to what they’re currently selling, and we’ll both be rich!”

The tech inventor fails to comprehend the enormous work it takes to launch, maintain, and manage a sales team to success selling a newly invented product to small business owners.

Even if their product is logical, reliable, functional, and can be sold in a relatively straightforward manner, the costs of running a sales team are lost on people that haven’t done it.

Recruiting, training, managing, and compensating sales people takes money, talent, and time.

Hiring a single sales representative that will be paid a modest base plus reasonable certainty of commissions requires screening through 20 to 40 candidates.  As you can imagine, the business to business sales representative is a special breed, and the one that will call on family owned businesses is the rarest of the rare.

Add the costs of collecting money, processing orders, servicing the customer, and renewing the accounts, and you’re looking at a pile of expense before the first dollar of profit falls to the ground.

For dumb math, if a product has a wholesale cost of $1, it will need to be sold to a business profitably, it will need to be sold for $3-$4.

Looking at it a different way, if a product has a selling price to the small business owner of $100, the hard cost of goods can’t exceed $25-$35.
The direct sales costs are going to be over 40% in launching a new product, and sometimes 50% or 60%.  These sales take lots of education and determination.

I admire people that can launch exciting businesses that sell products to local businesses.  It’s not easy, but it can be done.

It’s just going to take longer and cost more than you think it will.

And if you haven’t gone out yourself to make dozens of cold calls on businesses that don’t know you, you’ll find that it’s a thrilling, exciting, and rewarding business that deserves every penny that’s generated.

If you still want to talk about your new product for small businesses, drop me a line.  Once in a while we pick a winner and make a few waves.

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