Outsourcing Sales versus Building Internal Capacity

Outsourcing Sales versus Building Internal Capacity

Should you outsource your sponsorship sales or build internal capacity? I get this question all the time! The answer is not simple, because it depends. Here are the pros and cons of outsourcing and internal capacity, and some additional thoughts.

  • By outsourcing your sales, you can typically generate deals faster. A professional sponsorship salesperson or company has the network and skilled staff to deliver the goods!
  • I have some concerns, because the relationship then exists between the sales agency and the sponsor, not your property and the sponsor.
  • I often see and recommend outsourcing sales for major naming rights, and building internal capacity for other assets and programs. You can take over the sales process for naming rights renewals down the road.
  • Internal capacity takes time to develop, but in the long run, it will cost less money. Recently, we were engaged to do an analysis for a property. The initial thought was to outsource sales. (We had initially suggested that, for reasons such as the property did not want to set up another department and staff a sales force, they needed quick wins. From a budget perspective, it’s easier to hire a contractor than a fully benefitted staff person. And there was a reputable third party that could do the work.) But when we ran the analysis at the end of five years, the cost between outsourcing and internal capacity was about the same, so the net benefit of revenue was about the same. But when looking at the ten year window, internal capacity yielded 50% more net revenue.
  • Developing internal capacity sometimes sits better with other operational staff versus having an “outside hired gun” selling and not “understanding the culture” of the organization.
  • The type of assets you have will also determine if you should outsource. If the potential revenue is low for the property, you may want to hire a flat rate non-commissioned sales agent or pay a higher commission rate. (If your sales agent is going to work half time for a year for you to bring in money, they need to earn $25,000+ from you. If your potential revenue is $100,000, then your payout is 25%.) Likewise, if you have a $250,000 per year naming right available, outsourcing may be the ticket if the agency can secure a ten-year deal within six weeks and you pay them 10% plus a retainer.

The answer to the question, “Should I outsource our sponsorship sales or build internal capacity?” is not simple. You need to look at several factors. In some cases, the clients cannot manage additional staff. Then outsourcing is a “no-brainer.” In some cases, the sales agent can get you the money faster and more efficiently, but you may pay through the roof to get it. We work through all these scenarios with our clients before making our final recommendation. Determine what is best for your organization because every property and situation is different.

And remember, if you have questions you want answered, feel free to shoot them to me through this link Questions for Brent to answer in an upcoming TMC.

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