Group Co.
Selling research has never been easy and it has become even more challenging as institutional research spending has declined. The pressure on independent research boutiques to maintain revenues has intensified from MiFID II, tightening research budgets, and increased competition. It is more imperative than ever that research firms have a solid sales strategy in place if they wish to maintain their market share, and hopefully increase it.
The good news is that independent research providers have different options for organizing their sales efforts. Let’s examine each in turn.
In-House Sales Team
Successful in-house sales teams can bring in revenues two to four times their salary—and sometimes more— with all profits going to the IRP’s bottom line. To build an in-house sales team, you need capital ($100,000+/year), time (10-20 hours a week initially, 10-20 hours/month steady state) and experience in managing a sales team.
The cost of the first hire of a sales professional is around $165,000/year, plus commissions and overhead expenses. This is also assuming that the salesperson will be responsible not only for direct sales but also for all their marketing, lead generation, invoicing, and accounts receivable follow-up. More mature sales teams include a marketing director (to assist with in bound lead generation) and a relationship manager/client service director (to ensure that renewal rates remain high and that all revenues are collected post sale), in which case more capital would be required.
For these reasons, IRP owners that are well capitalized, have extra time to invest in the hiring process and have background in sales and sales team management (i.e., experience hiring, firing, and managing a sales force) would be effective at building their own in-house sales team.
Solo Sales Agents
There are a few different approaches to outsourcing sales. One option is to commission a sales agent who would typically be a single operator with sales experience in the financial markets. The advantages to working with sales agents include advantageous commission rates, minimal commitment requirements, and low downside risks.
Perhaps the most attractive aspect of working with sales agents is their low commission rates (thirty to forty five percent for the first year of a sale made). This is possible because sales agents keep overhead at a minimum by working out of their home or a modest office. And because sales agents rely on their own network for prospecting, they do not need to invest in pricey databases for lead generation. Likewise, their introductions tend to be more personal, so sales agents can avoid investing in and working with a professional marketer. And lastly, with low renewal commissions (0 to 40 percent for subsequent years if the new client renews their subscription) sales agents have no need for back office or relationship management staff.
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