In a recent article I confessed to have fallen out of balance with one element of our marketing campaign. At the end of the article I vowed to take a deeper look into each of the 7 critical elements to inbound marketing. I'd previously discussed these elements in Preparing for an inbound marketing assessment so we're going to work off of that structure for that same structure for this article.
Element 1: Lead Generation
The last article started "The first step is getting eyeballs to the right spot, generating leads is critical as you can't produce propsects and ultimately clients without leads." Knowing that lead generation is critical to closing new customers and reaching sales goals we better make sure its in balance.
A leak in your lead generation usually costs you money too, most companies spend on an array of lead generation tools such their CRM, dialing systems like InsideSales, cold calling companies, their website, and internal sales people.
These are all forms of lead generation expense whether you care to admit it or not. If you have a sales person cold calling half the day to set a couple appointments its not very hard to calculate how much you're spending on the lead generation share of their compensation.
Balance is critical so lets take a closer look at a few different scenarios that tie to lead generation at the top of the sales funnel. Which of the following scenarios do think has the most balance and effectiveness?
Cost and effectiveness of 3 full time sales reps
Many companies wishing to grow their business spend considerable money on sales staff. They pay them a salary, commissions, insurance, and benefits. They give them an office, computer, and expense account. In this scenario lets estimate the cost of three sales people along with some of the other expenses on a monthly breakdown
Salaries $3,000 x 3 = $9,000/month
Skills and product training 10% of salaries = $900
Office Expense 10% of salaries = $900
Management Expense 10% of salaries = $900
Insurance, taxes & benefits 20% of salaries = $1,800
Commission estimate 50% of salaries = $1,500 x 3 = $4,500
Total monthly lead generation expense = $13,500 (commission not included in lead generation/startup calculations)
It generally takes at least 3 months to get a sales rep up and running to the point of production, it takes time to build a pipeline and for them to become competent enough to become effective at generating new leads. That means you're going to likely spend of $40,500 to get a three-person sales up to the point of production. Most likely, before they've even made a single sale.
That is some pretty serious start up costs, especially considering that about half of your sales people will fail inside the first 6 months. The only thing worse than spending $40,500 is wasting it on bad hires. Sales people are the most risky business decision your company will likely make, and while there is potentially a great reward the costs can be obscene.
Cost and effectiveness of 2 full time sales rep and inbound marketing
As opposed to the example above let's look at a different scenario, one that replaces one of the existing sales staff with an inbound marketing campaign to supplement the remaining two. If designed and implmented correctly, inbound marketing can supplement sales staff activity. For example, if inbound marketing can produce new leads independently from your sales rep activity the results can be compared to the lead generation from the previous example.
While many of the costs are similar you can certainly avoid some of the overhead expenses generated by the sales representative.
Salaries $3,000 x 2 = $6,000/month
Starter Inbound Marketing $2,500/month
Skills and product training 10% of salaries = $600
Office Expense 10% of salaries = $600
Management Expense 10% of salaries = $600
Insurance, taxes & benefits 20% of salaries = $1,200
Commission estimate 50% of salaries = $1,500 x 2 = $3,000
Total monthly lead generation expense = $11,500 (commission not included in lead generation/startup calculations)
The totals here are interesting because that adds up to a $2,000 per month reduction in sales deparment overhead. That's also a decrease in commissions because the leads generated from 3 sources are only paid out to 2 sales reps and reps should make less on leads generated by inbound.
The extra leads generated by the inbound marketing campaign get your expensive sales reps in front of prospects more often and on the phones less. They're happier and more productive while costing you less money per lead. This really adds up to be a pretty attractive comparison, why don't you have an inbound marketing campaign in place yet??
In summary we've dug in a bit to the lead generation options you have for your company. We've determined that the cost of a sales department is expensive, and risky. We've discovered that there is significant startup cost before you'll see production, so you better make some great decisions in building your department.
It's also evident that the cost of 3 sales people compared to 2 sales people and an inbound marketing campaign is really not a very hard choice at all. If you can save $2,000 per month, have 33% less people to manage, and the ones you do have to manage happier with more tools in place to help them succeed you can hardly live with yourself for not making the decision.
If you're looking for a marketing firm that understands both sales & marketing, and how marketing aides the sales process to produce the results desired then check us out. We'd love to show you how an inbound marketing campaign can grow your business, raising your flow of profits.