Malcolite Corp. is beefing up its sales force. Its business is still struggling: The recession took a substantial toll on the Northbrook, Illinois-based manufacturer of industrial products such as skylight diffusers and exit signs, and sales dropped 20 percent in 2009, necessitating layoffs of four staffers in the office and factory.
So the company’s recent sales hires weren’t made in response to growth. They represent a bet that adding sales and marketing specialists to Malcolite’s staff of two dozen will help it carve out a larger share of whatever potential sales are on the horizon in a still-slumping industry.
The incentives for sales staff may vary, but the incentives for entrepreneurs are clear: Investing in sales and marketing can boost revenue and help a small business survive the downturn, even if the decision to hire more staff is painful.
Many of Malcolite’s customers are schools, hospitals and government facilities, where maintenance budgets are frozen because of the economic downturn. But CEO Jason Howard thinks some of those institutions will begin spending again soon, so he is hiring telemarketers and other sales staff in an effort to beat his competitors to the punch when his clients’ wallets thaw.
“We can’t sit on our hands and wait for the sales to come to us. So I’m hiring people to make those phone calls that will get them in front of our customers and drive more business,” says Howard, who has hired four staffers so far and is looking for one more.
Companies are willing to hire sales and business development specialists long before ramping up production or bolstering administrative staff because they hope that sales positions will quickly pay for themselves by bringing in new business. Additionally, salespeople often are more willing than, say, an office assistant to allow a company to hedge its bets by accepting incentive-based contracts.
Another Chicago small business, Where I’ve Been LLC, is pursuing a similar strategy. The online social travel network isn’t strapped for cash—it just received $750,000 from Lightbank, the investment firm established by Groupon Inc. co-founders Eric Lefkofsky and Brad Keywell—but it is limiting its risk by offering incentive-heavy pay packages as it adds to its sales team. CEO Michael Dalesandro says the economy is the prime factor.
“The recession makes the idea of an expanded sales force seem realistic,” says Dalesandro, who has hired two salespeople and is looking to hire two more. “You can get young, smart, hungry people out there for a decent wage. So where a lot of people were offshoring or outsourcing, now you can bring this back in house and get talented local people.”
Dalesandro knows that by loading the contracts with incentives, he risks losing profit. That’s something he can live with if the new salespeople can demonstrate a viable market for Where I’ve Been’s products. It’s also an attractive proposition for the salespeople.
“If somebody in sales or business development is really good but will take a little time to get up and running, then you pay them a low base and maybe even an outrageous amount of upside, but with the understanding that this is a temporary thing,” says Randy Patterson, senior managing director of Chicago turnaround management firm Lake Pointe Partners. “If this person is unemployed, and you’re providing enough of a base for them to keep the lights on and enough upside to excite them, if they believe in their capabilities and are a little entrepreneurial, they might jump at that.”
Dalesandro and Patterson stress that high-upside arrangements with salespeople should be temporary because, in the long term, a business should accept more risk to earn higher profits. For now, however, deals like this represent a way for small businesses to grow with minimal risk.
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