The estimated reading time for this post is 5 minutes
The Great Debate- Fractional vs. In-House
Despite what many product-lead founders and funders think, almost all products need to be sold to the market at some point in time to create sustainable revenue growth. The dynamics of business growth and stability hinge significantly on how well a company’s products or services are sold. For small and medium-sized businesses (SMBs), having a robust sales function isn’t just an addition; it’s a necessity that can either spur growth or stagnate a business’s potential.
So begins the quandary that many CEOs, founders, and private equity investors find themselves in—whether to house the sales function entirely within the company or to leverage the versatility of fractional sales resources. This article will chart the facets of this quandary, evaluating the merits and detractions of both approaches within the landscape of SMBs.
Understanding the Sales Function
The Backbone of SMBs
At its core, the sales function is the engine of revenue generation; it involves strategies, processes, and activities dedicated to promoting and selling various offerings. It’s an intricate part of SMB operations that demands attention and resources. However, while large corporations may have the luxury of expansive sales departments, SMBs often grapple with resource constraints related to personnel and tools thus making the management of the sales function a challenging endeavor.
Challenges on the Frontlines
Many SMBs face an uphill battle in generating consistent revenue due to limited resources, low brand recognition, and strenuous market competition. Devoting time and capital to sales may seem like a divergence from core operations, but it’s a myopic view that can jeopardize the business’s longevity. An efficient sales function aids in seizing market opportunities, generating leads, and ensuring customer retention, all of which are pivotal to repeatable growth.
In-House Versus Fractional Sales
The Classic Model: In-House Sales
Most SMBs and companies house and develop their own dedicated sales team. The proponents of this model advocate for the seamless integration of sales with other functions of the business. They purport that by housing your sales teams in-house means:
- Full-time commitment to the business’s objectives
- Direct control and oversight over sales strategies and execution
- Closer alignment with the company culture and product knowledge
- Standard ramp times for new team members
For instance, take a burgeoning tech SMB that develops innovative software for education. By owning an in-house sales team, they ensure their sales personnel are deeply versed in product intricacies and market ebbs and flows, thereby allowing the sales personnel to tailor and iterate their outreach to target educational institutions effectively.
The Modern Approach: Fractional Sales Resources
On the flip side, the concept of fractional sales involves engaging sales professionals on a part-time or contract basis. This approach offers various flavors of flexibility, including:
- Scalability of sales efforts as per business needs
- Expertise from seasoned sales professionals without the full-time overhead
- Diversity in strategy from sales experts who bring cross-industry insights
- Shorter ramp times because sales team need to focus messaging and product knowledge only
- Allows product and service teams to focus resources and attention on these functions while the new customer acquisition is effectively managed
Consider a specialty coffee roaster SMB seeking entry into new regional markets. By harnessing fractional sales resources for their initial market entry, they can tap into existing networks and relationships built by seasoned sales professionals who understand regional nuances without bearing the financial and personnel management resources of a full-time sales team.
Making the Right Call
Deciding whether to commit to an in-house team or to contract fractional sales services requires a calculated assessment of one’s business. Key factors include:
- Your financial resources matched to your personnel needs for sales motion execution
- The speed at which you want to execute sales motions and acquire new clients
- Your ability to invest in personnel and tools through their “ramp time”
- The long-term cost implications and ROI of in-house versus fractional sales investments
Executives should be honest with themselves about their current sales performance, future business goals, and the scalability requirements that accompany growth. This evaluation process isn’t static; it can evolve as the business matures.
I’ve seen many SMB Leaders and VC-financed Founders that have limited financial or personnel bandwidth usually resort to alternate paths. They hire one or a few sales-related FTEs at a financial investment they can afford right now and provide a significant revenue share so as to “entice” top performers to their team. Unfortunately, this strategy rarely creates the desired results.
For example, late last year, I was in talks with three technology companies in distinctly different industries whose 2023 sales motion has basically failed or underperformed. In each case I advocated for a different approach wherein we would build fractional teams for them at almost 1 ⁄ 3 the financial investment using experienced personnel in the respective functional processes and tools that would thereby reduce ramp time from months to weeks.
Every single founder turned me down and chose to go a traditional path of building an internal motion. As of the date of this post only 1 of the 3 companies have had any material success in hiring according to their stated plans and thus most have likely not made any material additional revenue traction in the last five months..
Conclusion
The decision to own the sales function in-house or to adopt fractional sales resources isn’t binary; it’s indeed a spectrum where SMBs can find their footing based on their unique needs and growth trajectories. Both approaches can exceedingly serve their purpose, and leaders must appraise their situation through lenses shaped by strategy, cultural coherence, and financial prudency.
Building a sales model aligned with your business is tantamount to scripting its success story—a narrative underpinned by the power of adeptly managed salesmanship. So, do you need to own the sales function? The answer depends on your aspirations and how far you are willing to go. However, one thing is clear – having a strong and effective sales function is crucial for the growth and success of any SMB.
Whether it’s through an in-house team or fractional sales resources, businesses must prioritize this aspect of their operations to thrive in a competitive market. So, evaluate your options carefully and choose the approach that best suits your business’s needs to pave the way for sustainable growth and success right now. The debate between in-house and fractional sales will continue, but ultimately, it is up to each organization to determine what works best for them and their unique circumstances.
