Investors want to know your lead sources, costs, sales system, meeting strategies, and rep performance. They’re assessing your sales model’s scalability under increased investment. Acquirers love businesses constrained only by capital. They seek efficient sales engines that need more fuel. Most investors have capital but struggle to find scalable sales systems.
The investor’s questions aim to gauge the scalability of your sales model under significantly higher investment rather than simply to assess your past performance. Acquirers love stumbling over a business where the main constraint to growth is capital. They fall over themselves for a company that has an efficient sales engine that needs more fuel (i.e., money). Most investors have lots of capital but struggle to find businesses with a sales system that won’t collapse under the weight of more money.
How Gregg Romanzo Built a Sales System
In 2004, Gregg Romanzo started an old-school freight brokering business. Most freight brokers are nothing more than a handful of people arranging shipments in return for razor-thin margins, but Romanzo realized his sales model had the potential to grow into something much bigger.
Romanzo’s model involved hiring high-potential people with a relatively modest base salary of between $40,000 and $60,000 per year and teaching them the business from scratch. He armed them with a computer, the best scheduling software and tied compensation to the gross margin of the jobs they booked. Romanzo knew if he could get a rep to clear $100,000 per year in total compensation, he would be able to keep them for the long run.
Romanzo took his very best talent and built a team around them so they could earn even more. This cohort of salespeople could clear several hundred thousand dollars in an exceptional year.
Since Romanzo paid a relatively low base salary and his people didn’t need a lot of equipment, he was able to hire more salespeople. By the time he sold his company, he had 200 employees—190 of which were salespeople. That’s 95% of his headcount dedicated to sales.
How does that compare to your company? If your sales model is scalable, consider monetizing it. Hire more reps or show investors its durability.
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