Tomicide Solutions, January 2017

But Who Brought That Sales Lead In Anyway?

By Tom "Bald Dog" Varjan


As the old saying goes says "You can catch more flies with honey than with vinegar". It means it's easier to have people accept your ideas through polite and reasonable arguments and a bit of flattery than through hard-nosed confrontation.

Nevertheless, using the proverbial vinegar, many IT SMEs hire super-aggressive bulldog type salespeople and send them out to the four winds to dial for dollars and knock on doors to harass innocent people with their idiotic sales pitches.

Somehow, IT leaders ignore the honey-based approach.

An approach that cuts out the mindless chasing after your prospects and magnetically attracts them to you.

And if you employ subcontractors in your business, you've already laid the foundations of this honey trap approach.

I know the phrase "honey trap" is used in a drastically different context, but today, we use it for lead generation, which undoubtedly is one of the biggest issues in most IT companies.

For many, the situation is so bad and sales leads are so few and far between that every new sales lead is a cause for major celebration, and IT companies want to turn those leads into paying clients in one fell swoop without any qualification.

But there is a very specific situation when it's less than obvious who has the lead and who has the right to convert it into a client.

And that's when you work with some, and they are approached for potential work.

What to do then?

Opinions differ, so I can give you only mine based on my years in the industry both as a subcontractor and as someone who coordinated subcontractors on various projects.

I prefer not to use the M word (manage) because in my view we should manage things and lead people.

One School Of Thoughts...

...is that if you work as a subcontractor on a project on site and someone approaches you to discuss further work, then it's open territory and you can take the work if you want to.

After all, you're an independent contractor to the main IT company, and you need other clients as well to stay in business.

Besides you may also feel that by working with the main IT contractor, your usual prices get degraded to provide a hefty mark-up to the main contractor.

This is a valid reason, and many IT subcontractors say they are entitled to pick up any work on the client's site.

So, they do, and when they confront the main contractor, they justify their actions by saying that they are on-site and any work that they come across is rightfully theirs and only theirs.

The Other School Of Thoughts...

...is that any opportunity found on the main contractors' job site belong to the main contractor.

Now imagine you work in a silver mine and find a hefty gold deposit. So, you come back after-hours and start mining the gold for yourself, after all you've found it.

Now think about how the owner of the mine will react to that, considering that he's invested a significant amount of money to find mining-worthy silver deposit and build the mine to bring it all up.

Yes, technically you've found the gold, but during working hours and in someone else's mine.

It that really yours?

Now let's see...

My School Of Thoughts...

...is that it's not yours.

The main IT contractor has that project for you because he's spent a small fortune on marketing a and building up a prospect list.

Then someone on that list has initiated a new project. But that initiation takes significant time and money to achieve.

As a main contractor, I invest time, energy and money in marketing because I want to benefit from it down the road.

I certainly don't want my subcontractors to poach my clients just because they are too cheap or too stupid to do their own marketing.

Nevertheless...

I Believe In Rewarding Subcontractors For Finding New Work

Subcontractors differ quite a bit. There are hard-core technical people with seriously challenged social graces.

Just think of Dr. House from the highly successful TV series. The medical genius with zero bedside manners.

And there are subcontractors who can engage in conversations with clients to discover what else can be done to further improve the client's situation.

But most subcontractors can't do that.

Why?

Because as soon as clients ask them, they start talking about bits, Gigabytes, Megahertz and other technical terms; all the stuff clients don't care about. They care about ROI, profit improvement and cost savings. Typical boardroom-level stuff.

But there are some business-minded subcontractors (who should stop being subcontractors immediately), who can engage clients in some initial discoveries and then connect clients with their main contractors.

Then the main contractors and clients can meet and discuss further opportunities.

And then comes the reward for the subcontractor.

What can that reward be?

Considering that this work has come around as a result of the subcontractor's ability to talk business with the client, which is a form of selling, I think this subcontractor deserves almost the same commission that you pay your salespeople.

I say "almost", because salespeople close deals, whereas in this situation, the subcontractor unearths an opportunity, somewhat qualifies it and then passes it on to the main contractor who then closes the deal.

Nevertheless, the deal is initiated by the subcontractor, so I believe, he deserves a min. 10% of the opportunity's price.

While this may seem to be a bit high for some, consider how much it would cost you to find a brand new sales lead and reach the point of discussing opportunities. The "from contact to contract" process with a new lead would cost you much more that what you pay your subcontractor.

Also, consider your salespeople's average closing ratio. It may be somewhere around 8-12%. And you pay them both a base salary and a nice commission.

So, 10% to this subcontractor is win-win.

And if you are really smart, you'll send your subcontractor to a course to learn how to talk to buyers about future projects. Oh, and you pay for the course with a decent daily stipend.

Now this subcontractor becomes your part-time commission-only salesperson. He is highly motivated to keep his ears open for new opportunities and knows how to properly talk to buyers.

And being on site, he's mingling with the kind of people most of whom would never meet your "proper" salespeople.

And this is the point where you can start increasing the commission percentages for these subcontractors.

They are the ideal people from your standpoint: They perform paid work while selling future work. You can't get any better than this.

Having seen this work in many of my clients' companies, it's not surprising that they've eliminated their field sales forces. They've rather spent some money to get their subcontractors trained in boardroom matters and boardroom English, so while they're on site doing the work, they can also chat about future work.

Having looked at the theory of this dilemma, now we can look at...

What To Include In Your Subcontractor Agreements?

Here are some inclusions we've developed with past clients over the years of working with a broad range of subcontractors.

The good news is that if you treat and pay your subs well, they do their best to adhere to your rules, because they know this is how they get paid well.

  1. The subcontractor identifies himself as the subcontractor of Main Contractor Inc.

  2. The subcontractor is barred from doing any self-promotion while working on Main Contractor Inc.'s job site. He can't talk about personal business and can't hand out business cards or other collateral materials.

  3. The subcontractor performs the work based on mutually pre-agreed instructions a from Main Contractor Inc.

  4. The subcontractor cannot agree to any altered, modified, or new conditions with the client. Any such client requests have to be requested from Main Contractor Inc.

  5. The subcontractor may engage in conversations with client about possible future work, but then must pass it on to Main Contractor Inc. See also the previous point. When the opportunity becomes a project, subcontractor receives a 10% referral fee on the new opportunity.

  6. The subcontractor's payment is a pre-agreed competitive flat rate within a pre-agreed time frame. The subcontractor agrees that the assigned work will be completed in good quality, even if it requires additional days, but payment is capped at the end of the allotted time frame.

  7. All work created and all materials provided to subcontractor are the sole property of Main Contractor Inc.

  8. Subcontractor may not name this client as the subcontractor's client in conversations or in writing, and all communications with Main Contractor and the client are confidential and subject to the non-disclosure agreement the subcontractor has signed.

  9. Subcontractor is to conduct himself professionally, observe business ethics and courtesy, and meet the work all the above requirements above.

  10. Failure to do so in the opinion of the client or Main Contractor Inc. results in the instant termination of the contract and the cancellation of payment.

  11. The name of the client never enters the subcontractor's database, and the subcontractor has no right whatsoever to stay in touch with the client to solicit future business. All negotiation takes place between the client and Main Contractor Inc.

Yes, some of the above points may sound a tad strong, but just think about how much you have invested in in marketing and how much the subcontractor has saved by not investing in it.

So, your contract has to specify both what subcontractors can and cannot do while on the job with a main contractor.

The other thing is that the better your marketing is the less you have to depend on others to give you work.

Yes, you make the marketing investment, but you reap the clients too.

In the meantime, don't sell harder. Market smarter and your business will be better off for it.


Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.