I want to look at the three main ways to actively sell a website: Online/direct mail, via telesales and in-person sales.
With online sign up, the cost is that of marketing the application. The marginal cost per sale is close to zero, but as Ryan Carson noted, even with a popular blog, TechCrunch and Digg coverage, you still need to invest in marketing to build the business. There is no magic number for this to work. You just need to create a compelling landing page, pay for some AdWords, track your conversions and do a lot of A-B splits or multi-variant tests until you get a good conversion rate and a good sense of your cost per sale. Depending on how good a job you do it could be anything from under a dollar a deal to many hundreds (or conceivably thousands) of dollars a deal. While you can sell anything online, typically this works best for solutions that are based on an affordable monthly fee – ideally with a free trial period. Affordable can range from tens to the low hundreds of dollars a month depending on the solution and the target audience.
I am including direct mail in the same category as online sales. There are few audiences now where direct mail is the best way to launch a service. It is cheaper and more efficient to prove the model using AdWords to test your copy, offers, pricing, title, graphics, etc. and then consider a mail shot once you’ve locked a successful campaign. The main reasons to use a print campaign upfront are to stand out from competitors doing online only advertising or to reach a technically unsophisticated audience.
I actually worked for a telesales company shortly after University and have run a number of small B2B telesales operations in the past. A well run telesales operation (even without expensive auto-dialers) should be aiming for 20-30 dials an hour per rep, 10-15 contacts an hour, 3-8 full pitches an hour and 1-2 requests for further information an hour. I know companies that used to call through the phone book selling extremely small businesses simple websites where they could fax in some information and get a basic site – typically for $200-$500 a site. I believe that this could still be done profitably, but it isn’t a market that interests me (I can’t make any margin wholesaling to someone who retails for under $500), so I’d be interested to hear about anyone who knows whether such operations still exist, but I’m not very interested beyond that.
The trick to such an operation is operational efficiency (including in the sales department), excellent scripts, good training and a really large list. Despite what every sales rep would like to believe, telesales isn’t about a good list. It is about a big list and a good attitude. As the recipient of such telesales calls I can only hope that they will disappear as more people finally read vintage Seth Godin. I personally can’t imagine building a business based around such interruption driven marketing – it just doesn’t seem to be a viable long-term strategy.
In Person Sales
In practice it is extremely difficult to sell websites to SMB’s (small to medium sized businesses) without in-person sales, so we worked up some numbers based on years of experience in running sales teams and I’m hoping that the numbers don’t surprise anyone too much.
A general purpose sales rep can typically do 8-12 meetings a week when you include travel time, phone calls, networking, writing proposals and the like. This assumes that they already have a pipeline and are competent and successful but not a superstar. When you look at the ratio of first to second to third meetings for selling $5,000-$25,000 websites, that works out at 3-5 new prospects a week. Assuming a 1 in 3 to 1 in 5 closing ratio, a successful, experienced, motivated sales rep with a full pipeline can close around 4 projects a month. I have worked with sales teams of up to eight full time sales reps selling websites in this space and most reps close between 2 and 6 deals a month when properly managed and motivated, so 4 a month is not easy but neither does it require a superstar.
So, what does a sales rep cost? Well, it depends on where you are in the country, how good they are, how many other opportunities they have, how they get to meetings, and a number of other factors, but I think it is safe to say that the loaded cost of a decent sales rep (even in a very small company working out of a basement) is unlikely to be much under $80,000 a year including base, commission, travel expenses, phone, desk, a little office space, etc. You could easily justify doubling that number in the right market and office space, but lets take the low number and see where it takes us.
If a sales rep costs (fully loaded) $80,000 a year and can bring in 44 deals a year (with one month for holidays and slow periods like Xmas even if the sales rep is in the office) that is a cost of $1,800 just to sell a website. It always amazes me how many small start-ups don’t do these numbers. I still see people who do in person sales and who sell websites for $2,000 or less and wonder if they’ve ever taken the time to figure out why they’re not making any money!
Of course, if you wholesale (as we do – selling services to our network of resellers) or get business primarily by referrals then these numbers can change significantly. But it is worth remembering that even if you don’t have a sales rep (if you run your own business), your time has some value. I’d be interested. Are there consultants out there that do undertake sales activities (I know that many are good enough, established enough and perhaps lucky enough to stay completely booked just through referrals)? What numbers do you add to your bids to cover your sales expenses?