Outsource the Sales Function?
Internal or external sales force?
In general, selling through independent sales representatives or distributors allows a company to minimize risks. If their products do not sell, they do not lose anything because they do not pay any commission to their representatives. An internal sales force has a cost, whether they sell or not.
On the other hand, direct sales give the advantage of knowing the customers better, and to sell better because an internal sales force knows your products better. So how do we choose between independent sales representatives or an internal sales force?
This depends on your products first. If you sell generic products, an independent sales force enables a company to have a better coverage of a territory at a low cost. In this case it is generally preferable to use distributors which buy and resell your products, rather than sales representatives that are only intermediaries between the producer and the end customer. By using a distributor the company places the burden of sales administration on the distributor, which manages its own clients.
If you sell technical products, and if the sale depends on the technical knowledge of your products, it is advisable to choose independent sales representatives with care. They must have good technical competences and they must be committed to selling your products in the long term. Training sales representatives is costly, it would be a pity to train sales representatives that would represent your products for only a year or two.
In the case of expensive products, it is easier to find sales representatives that are only intermediaries but that do not buy and resell your products.
Enter a new market
To enter a new market quickly, sales representatives or distributors are probably the best solution. This minimizes risk, because these representatives are only paid if they sell your products, whereas your own sales force will cost you whether they sell or not. Local sales representatives are also the best solution because they know the local industries and local prospects.
Once you have developed a new market using sales representatives, it can be interesting to have your own local internal sales force, which could better continue to develop the market for your products than a representative. An internal sales force has the advantage of selling only your products, when most independent sales representatives sell many different products.
If you first developed a new market with distributors, it will be more difficult to replace them with your internal sales force. You must either stop selling products to your distributors, or you must compete directly with them. In both cases your offer will lose its clarity and its credibility for your end customers.