I have now been active in my role as Head of Sales for Eagle Filters for around 6 weeks now and facing the typical problem of how to expand a business to new markets. It’s a question that many in sales face, particularly when working with a growth company like Eagle Filters, which has a relatively narrow market of (gas turbine inlet air filtration) and having proven technology, and a vast number of solid customer references.
I figured that tackling this question openly through this article and publishing it here on LinkedIn might encourage some sharing of knowledge as well as provide some valuable insights
So, should I rely on agents or add new sales power in the existing sales team?
Of course, I have done my homework, including the market study, go-to-market plan, and have also looked at upcoming fairs and talked with old connections I have in the sector of the target market area. After all this I still come back to the root question: should I rely on the agent bringing us the new business, or should I recruit more sales power?
Agents of course have a lot of good arguments on their side. They typically claim to possess all the connections to potential major customers, naturally all the way to the top level. In some regions you would benefit greatly in having a native language agent in your sales team. All this would of course be very valuable, but there is no way of telling beforehand if a new agent in fact knows the decision makers or if he just has met them as an acquaintance once or twice. In addition, if the client doesn’t need your products, even the best connection to the customer will not change that. On the other hand, if your product is superior to what competitors are offering, your own sales people should have no problem getting an introduction or appointment with the potential customer
Building a market with an agent should be a relatively low-cost way to get started
Agents’ traveling costs are definitely lower than having your own sales personnel go around in a new country. Agents can more easily just drop by and meet with the customer to follow up on any small items and nurture the customer relationship better than the ‘Merry Christmas’ email we typically send to everyone in our (GDPR compliant) CRM system. But on the other hand, if you will have to send technical sales people to accompany an agent to every credible sales meeting it will anyway increase sales costs - and in most cases the agent will charge for their travel costs, making sales costs even higher.
Selecting an agent will also consume a lot of your time and eventually requires a lot of training and support in the beginning. But building a market with an agent should be a relatively low-cost way to get started – especially if you get a success-fee-based agreement in place. Such an agreement will incentivize the agent to quickly find the first prospects and leads or even RfQ´s, since their first pay check is tied to delivering the results. But if the initial boost of agent activities would not pay out soon enough you may experience a drop in the agent’s morale and eventually you might get a ‘sleeping agent’ and end up having to reconsider your approach to the specific market. You may also need to pay commissions for the ex-agent for his services for some time after the termination of the contract.
There are indeed downsides to the agent approach, but does that mean expanding the sales team internally is the answer?
Another benefit is that you hopefully recruit the right person who shares your strategic vision and becomes a new driving force in your company, taking it to new levels of growth and profitability.
Hiring a new member to your sales team is not cheap. You will have to find the suitable candidate (or more); meet them a few times; agree on various employment issues (salary structure being just one of them); familiarize him/her with your company and sales team. In any case, your overheads will increase while you wait for the new sales person to begin delivering results as the first contract.
The upside though is that you are able to use one sales person to cover several geographical areas, depending on the size of the market. Another benefit is that you hopefully recruit the right person who shares your strategic vision and becomes a new driving force in your company, taking it to new levels of growth and profitability. But it can all go horribly wrong, and when having a small team, you really cannot afford to have any dead weight in your team.
If your market research shows that you have potential in the region and you end up paying a certain percentage of your turnover as agent´s fees you better have made the calculation showing that the increased turnover has a sufficient margin to cater the two consumers of ‘the pie’, especially if there is no gap or cutting mechanism in the agent´s fee.
At the end of the day, the selection between agent versus adding own sales people is a strategic decision that requires homework before moving forward. There are clearly arguments on both sides that are compelling, as well as real world examples of both approaches delivering results.
Even though the jury might still be out on which is better, what I do know is that both approaches only deliver results if executed with a carefully planned strategy.
Thank you for reading.
Author: Pertti Sundberg