Why outsource sales for software and Tech startups?
August 25, 2023
The outlook for SaaS businesses, especially in the software and tech sectors, is strong. With over 150 recent exits in Europe alone, growth potential remains high. But scaling a startup isn’t just about having a great product; it’s about executing a strong sales strategy. While early success can come from a founder’s network or a product’s strength, eventually, you need to invest in a dedicated sales function. But where should you start?
For tech startups, especially those focused on software solutions, outsourcing sales can be a smart, scalable, and cost-effective move.
Cost Of Sales
Great salespeople, along with developers, are the number one cost for tech companies. The first thought may be to hire an in-house sales team, but is that the right decision during your company’s early stages? Long-term, an internal sales team will likely deliver the best results. They’ll have a deeper understanding of your product and internal processes. However, outsourcing your sales function during the early phases of growth could deliver faster, more cost-effective results.
Why Outsourcing Saves Money and Time
1. Cost Considerations: Building a sales function internally is expensive, especially for startups.
. Recruiting and training a salesperson can cost between $15,000-$30,000 upfront, with no guarantees on their performance.
. Base salaries often exceed $50,000—and that’s before factoring in commissions.
. Don’t forget the need for a reliable CRM system to support your new hire, plus the training involved.
. Salespeople rely heavily on leads, meaning your marketing budget will need to increase to support lead generation efforts.
2. Time-to-Results: Even with the best hires, sales results won’t be instant.
. Salespeople need time to onboard and settle in. During this period, they’re drawing a salary, but your pipeline might not be converting.
. Building connections and starting meaningful sales relationships can take months. According to a report by Implicit, the average B2B sales cycle takes almost 3 months from lead generation to deal closure. For mid-size deals, we’ve seen 3-month cycles, while Enterprise deals can take 8 months or longer.
The Case for Outsourcing Sales
If building an in-house sales team is too expensive or slow for your current stage, outsourcing your sales function can be a game-changer. Whether you outsource the entire sales funnel or create a hybrid model (in-house + external agency), outsourcing offers significant advantages.
Key Benefits of Sales Outsourcing for Startups
1. Industry-Specific Expertise
Sales outsourcing firms have a deep bench of professionals with experience across various sectors, including SaaS and tech. This means you’ll have access to people who already understand your product, target audience, and market dynamics.
2. Speed-to-Market
Avoid the time-consuming process of recruiting, onboarding, and training. Outsourced sales teams come pre-packaged with the skills needed to hit the ground running.
3. Scalability and Flexibility
An outsourced partner allows you to scale up or down based on demand. If a team member is unavailable or underperforming, the outsourcing company can easily provide a replacement, ensuring consistent performance.
4. Results-Driven Focus
Internal sales teams often face distractions from other business priorities. In contrast, outsourced sales teams are laser-focused on results, delivering on key performance indicators (KPIs) that drive revenue growth.
5. Tech Stack Ready
Most outsourced sales agencies come with their own tools, such as CRM systems, which allows them to get started immediately—no additional tech setup or investment required on your end.
6. Faster Growth and Scaling
If your product gains rapid traction, outsourced sales teams can scale alongside you, allowing you to seize growth opportunities quickly without the bottleneck of internal recruitment.
7. Minimal HR Hassles
Outsourced sales teams come with far less HR management. If performance isn’t up to standard, you cancel the contract or request a replacement—no messy terminations or severance packages.
8. Expanding into New Markets
Breaking into new territories, like Europe or Asia, is much easier with an external sales team that already has local knowledge and connections. This can significantly reduce the risks of entering a new market and speed up your go-to-market timeline.
What to Look for in a Sales Outsourcing Partner
Choosing the right sales outsourcing partner is crucial. There are countless companies out there, so how do you find the right fit?
Key Factors to Consider
1. Don’t Go Cheap
Outsourcing will generally cost less than building an in-house team, but that doesn’t mean you should opt for the lowest bidder. Focus on the capabilities and track record of the outsourcing firm. Do they understand your business model and the SaaS or tech sector?
2. Clarify Deliverables
What exactly are you getting for your money? Will you own the database they build, and how will you access it? Are they providing qualified leads or just raw contacts? Make sure deliverables are clearly defined from the start to avoid miscommunication.
3. Understand Their Process
Sales isn’t a black box. Your outsourcing partner should be transparent about their methodology. You should have full visibility into the process, be able to follow key metrics, and feel empowered to challenge results if necessary.
4. Treat It as a Partnership
The best results come from a partnership mindset. Don’t just hand over a marketing deck and expect magic to happen. Work closely with your outsourced team to ensure they fully understand your value proposition.
5. Patience, But Progress
While outsourcing typically leads to faster results than building an in-house team, don’t expect miracles on day one. Look for early signs of progress and focus on micro-goals as your outsourced team ramps up.
Recruiting an In-House Sales Team
If you’re ready to hire a full sales team or want to complement your outsourced team with internal staff, here’s what to consider:
1. Budget: How much can you realistically allocate to a sales team?
2. Internal Capabilities: Do you have the internal resources to manage and support a sales team effectively?
3. Growth Targets: Are you aiming for aggressive growth? In that case, a senior hire, such as a Chief Revenue Officer (CRO), might be worth the investment.
Whether you outsource or build in-house, focusing on your sales strategy early allows you to step back as a founder and concentrate on other critical tasks, like product development and scaling your business. Sales is a full-time job. Let the experts handle it while you steer the ship.