Comparing Costs of Maintaining the Field Sales Force vs Outsourcing the Field Sales Force


The spreadsheet (attached here) has been provided to assist you in a financial comparison between the cost of an outsourced sales force and of a captive sales force.  The comparison can be made for a company as a whole, a specific territory, or a product category.  The relevance of the comparison is not in the detail but in the bottom line. 

The wide divergence of accounting allocations, as well as of standard commission rates in various industries and companies, precludes furnishing specific numbers or percentages for the various line items suggested for consideration. In the manufacturers’ representative environment, at least one dollar is spent supporting a salesperson for every two dollars that the salesperson is paid.  In the corporate environment, the true support costs are likely to be higher.  

Your numbers and allocations can be extracted from your firm’s financial reports, using either dollars or percentage of sales for comparative purposes.  You will probably want to establish estimates based on the number of sales people involved, and the percentage of support and service expense allocated to the sales department. There is no need to break down the outsourced sales commission and spread it to the various expense items.  The total commission dollars or percentage can be projected, based on standard commission rates in your industry. 

In addition to analyzing the numbers entered on the spreadsheet, the management making the comparison should also calculate a number of harder-to-quantify intangibles:

• Cash flow benefits realized because the outsourced sales force is not compensated during the gestation of a sale, only when the sale is complete, shipped and paid for
• Reduction in legal expense and exposures because the outsourced sales organization deals with its own issues of benefits, workman’s compensation, sexual harassment, and other employee matters
• Value of the market research/field intelligence available because of the outsourced sales force’s being rooted in its geographic territory
• Leverage created by the synergy of multiple-line solutions selling
• Faster market access, penetration, and increased sales