Alpha Software was the perennial second largest firm in its CRM niche. Their sales team were masters of the consultative sale and consistently met their revenue goals. But second place wasn’t good enough. The CEO wanted to move into a new market and gain the revenue to capture the number one spot.
After several months of searching, Alpha settled on BetaSoft. On paper, the match looked like a home run. Beta sold a lower-price point mobile app that was well respected by small and mid-market businesses. Beta’s scrappy sales team sold hundreds of licenses every month. Alpha had mastered the sales marathon, but Beta dominated the sales sprint.
The perfect match? Build or Buy? Your answer could be critical for making the number.
Alpha Software purchased BetaSoft and began integrating Beta’s short-sales cycle team with their existing team of consultative sales professionals. Within a week, problems began to surface. The new team’s expertise in high volume transactions and lower prices seemed frenetic, unorganized and opportunistic. At least, that was the view of the consultative sales reps of Alpha Software. Beta’s sales team resented the “Ivy leaguers” who seemed to spend more time polishing presentation decks than closing deals.
The management team of Alpha decided to “upgrade” the new sales team by replacing them with their reps. The problems were obvious and immediate. The consultative reps couldn’t keep up with servicing the retail side. They weren’t motivated by the lower price and had no incentive to keep up with the velocity of the typical deals. Instead of building revenue, Alpha watched its revenue decline. After 12 months, the CEO found that his company was saddled with a new product it couldn’t sell.
Buy or Build?
Of course you want to avoid that scenario. This post will demonstrate the factors to consider in either buying or building your expanding sales team.
Assessing Your Current Situation:
Let’s say your current priority is to grow your sales team. In order to come to the best conclusion, consider the following issues:
- Talent Availability – How available are the types of reps that fit with your organization today?
- Market Opportunity Is the market opportunity you’re considering large enough to justify the investment and time involved in staffing a sales team?
- Time Horizon – Do you have the time to grow organically? Or will the market opportunity require a fast response?
- Investment – Do you have access to the capital required to buy a sales team? If not, organic growth may be your only option.
- Risk Tolerance – Do you have the high risk tolerance that is required to buy and onboard a team that has high attrition? The risk could be offset by the reward of a successful integration. Or is your risk tolerance lower? Would you rather mitigate risks incrementally with an organic growth?
Why Would You Buy?
There are two clear reasons for expanding your team with an acquisition. You either want to boost current capacity to move into a different geographic area. Or you identify a new opportunity and need to buy the capability to service this new market. Let’s look at the considerations for both reasons.
Adding Headcount to Your Current Team:
Let’s say your company has an eastern US sales team and wants to add a team to service the western US. You’ve identified a potential acquisition with a strong west coast presence.
What is the caliber of the new team? Evaluate their experience, tenure and areas of expertise. If the two teams are similar, integration is much simpler. But if the teams are too different their contrasting work methods could cause time-consuming challenges to overcome.
What is the culture of the new team? Are they accustomed to micromanagement and collaboration? Or are they cowboys that resist structure and resent tight management? The more diverse the culture, the more difficult and time-consuming the integration.
We created our Culture Awareness Test to help you accurately evaluate cultural fit. We’ve also added best practices for specific cultural fit challenges. You can download the tool here.
What is the integration plan? Onboarding a large team is very different than a single-recruit onboard. Is there enough management oversight? You’ll need to review the current managing team and change to fit the new team, either by adding or restructuring.
Buying New Capability:
Let’s say you want to leverage a new sales channel. You have a great direct sales team, but your customers are willing to purchase by phone. You could buy an inside sales team to service those customers.
Or you have identified a market opportunity that your current team cannot service. You are considering buying a team, but you need to evaluate whether the new team is actually good at the required skills.
You could grow your current team organically to capitalize on both of these scenarios. But know that growing requires a massive time investment in recruiting, hiring, training and moving up the learning curve.
If, instead, you decide to buy, you’ll need to consider how the teams will report organizationally. You could keep them separate so evaluating the acquisition is easier. Or you could integrate the teams with existing management. Either way, reporting and the rules of engagement need to be clear for both. Neglecting either will cause time-consuming infighting and disgruntled reps.
The Final Analysis:
In the end, you need to understand your appetite for risk and reward.
If you don’t have access to capital, you have little choice but to build. Building a team organically is lower risk, and risk can be managed incrementally. But it always takes more time than you think, and the rewards are slower to obtain.
If you have access to capital, you have the choice to build or buy. Buying a team, with all its mitigating factors, is higher risk. The challenges – both known and unknown — take time and attention to resolve. But if it works, the rewards are greater and they come faster.