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Sales Training Company Revenue Models

I was on the phone today with an associate from a private equity firm. 
He found ESR on the web and was interested in our opinion on a number of topics
as a foundation for his firm acquiring one or more sales training companies.  He
asked how sales training companies were generally doing during this
recession.  He pondered how a services-based company could weather these types
of economic downturns, correctly observing that it’s hard to find good talent
when the economy is strong and when there is a downturn, you run the risk of
having expensive, non-billable talent on the bench.  “Tough to grow a business
that way,” he said.

Next the comparison of training classes versus daily consulting came up.  I explained how sales training companies make significantly more margin from training classes than consulting.  In fact, many training companies only  do classroom training and are not at all interested in the assessment, methodology, process, customization, design, technology enablement, coaching and post-program support work that we believe is vital to a successful sales performance improvement intervention.  Why is that their approach? Margins!  A classroom day generates a lot more margin than a consulting day.  As a rule of thumb, a training day generates between 600 to 800% more margin than a consulting day. 

Companies that only offer out-of-the-box training rarely deliver the kind of long-term sustainable results that those that take the holist approach do.  The guys at Think, Inc! are proving that what was formerly considered a stand-along skill like negotiation really should be integrated with the client’s selling methodology.  As a result they have a consulting component, which they believe is required for success.

On the other end of the spectrum are companies that will not do any classroom
training unless it is part of a complete solution which would include the
components mentioned above.  Performance Methods is one.

There is another piece to this—non-classroom vendor-provided content, such as
e-learning modules, podcasts, remote coaching, opportunity management support
(White Springs, for example) and other web/software-based IP.  Vendor that
license this type of content to clients should be seeing highly profitable

What’s the point here?  You, the client, need to have the proper mix of consulting and classroom time as well as post-program support that will result in the greatest level of sustainable performance improvement for your team.  Don’t jump for what the training company proposes.  Don’t be willing to slash what’s required for success (like post-program coaching) because a vendor recommends it.  They may be willing to drop a less profitable but more important line item in your proposal because it suits them.


4 Responses

  1. Very often companys just do not know ‘what they want’ as they do not have clear goals or a picture of their future.

    When the going gets tough or there is a dip in performance or they are ‘just stuck in the rut’ the first port of call is training. As a training provider I totally agree with the benefits of training. It is up to us professionals to ensure we put a strong enough case together so that potential clients understand the need for pre consultancy and post support / coaching.

    Personally I rely heavily on ‘The six disciplines of breakthrough learning’ by Pfiefer.

  2. I completely agree, Dave. Consulting is a much lower margin activity than running training courses. Sometimes the margins are even negative, as people aren’t used to paying for sales consulting in the same way as other consulting interventions. Training companies also typically lack the pyramid structure and carefully-designed career paths that allow strategy consulting firms to make good margins on their work.

    Having said that, we do see consulting – at least in some specific areas related to performance improvement – as necessary glue to ensure that our work has impact. It’s therefore not optional in my eyes. Luckily, there is one benefit even if the margins are lower: a properly-designed programme yields better returns, which means we end up working for the same client next year as well!

  3. Great blog site! I will certainly return.
    Your comment about the proper mix of consulting and classroom time as well as post-program support is right on the mark. Particularly post-program support. One of the biggest money wasters in the world of training and development is the tendency for organizations to treat it as the flavor of the day. Who’s fault is that? The training organization to be sure. Why? It’s a natural reaction for company executives to move on to the next big thing, always growing, progressing, etc. According to most organizational cultures, shame on the executive that keeps bringing up last years initiatives. The training provider needs to build in a comprehensive post training implementation program for the client. It’s really a shame to do a good great job with training, take your fees and leave the client to fall victim to the natural course of events in their organization. The devil is in the implementation, period. Leaving the client with and helping them achieve a comprehensive post training implementation program is the best way to achieve measurable results and long term referrals. In fact, even a weak training program will achieve better results than the best training on earth if the implementation is strong and sustainable.

  4. There are four critical elements to effectively training salespeople. If Your Sales Training Doesn’t Include These Elements, Don’t Do It!

    1. Motivation
    Fact: Without motivation there can be no learning at all. If the experienced salesperson does not recognize the need for the information, the sales training effort will be in vain. How salespeople perceive the rewards of learning form the basis for the motivation to learn. Heightening the salesperson’s performance expectations can have an impressive effect on their achievement in learning.
    What You Can Do: When salespeople are made aware that their learning will be assessed, their motivation to learn as well as their ability to transfer learning will be enhanced. In other words, “what gets measured gets learned.” Provide a pre-training assessment that clearly and accurately points out skill gaps that exist. It is also effective to give salespeople a clear understanding of what they will be learning in advance of the onset of training. As an example: Read the book that accompanies the training program before the training rather than after.

    2. Reinforcement
    Fact: Follow-up reinforcement after training has proven to prevent relapse into old behavior. Reinforcing behavior change starts in the classroom by creating an awareness of why certain behaviors need to change. In addition, it is particularly helpful when the manager of the salesperson did the follow-up as it signaled to the salesperson that the transfer of learning is important and that the salesperson will be held accountable for it.
    What You Can Do: Provide field managers with reinforcement tools in the form of exercises, quizzes and field based homework. If they have remote salespeople that report to them, provide them with Internet training capability for conducting the reinforcement and reviewing the exercises, quizzes and homework.

    3. Retention
    Fact: 87% of learning is forgotten in only 30 days. Studies of retention demonstrate the impact of training that lacks a systems approach to reinforcement and learning transfer. Without these elements, 87% of learning is forgotten in only 30 days following the training event. Similar research indicates that even though the reactions of salespeople were positive to the training, no differences were observed in the behavior of trained groups and non-participants without a systematic approach to post training follow-up.
    What You Can Do: In addition to what has been previously mentioned, provide an assessment that measures both knowledge gain and the salesperson’s ability to apply the learning. Do this about 12 weeks following the initial launch of training. Give salespeople and their managers the assessment feedback as well as additional exercises and field assignments that will fill any learning gaps that are uncovered by the assessment.

    4. Transference
    Transference is the salesperson’s ability to use the information that was taught in their work-related activities. Obviously, this is the principal goal of training salespeople.
    There are three elements that are critical to transference:
    a. Salespeople must have expectations of follow-up activities and assessment that measures mastery of the skills being taught.
    b. Training must allow the salesperson to immediately practice the skills in their work environment.
    c. Managers must require them to demonstrate the use of the knowledge in the field.
    What You Can Do: Training activities that help make the connection of the learning to the work experience are effective. However, transfer is dependent on the post-training environment and manager support is considered a key environmental factor that impacts the transfer process. Therefore, managers must be provided with information and training on how to respond to each salesperson’s educational needs. They must be provided with the tools that will help their salespeople achieve mastery of the skills being taught.

    To Your Success

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