Same Old Song and Dance
Most revenue leaders at early-stage B2B ventures have heard of outbound sales development. Whether they worked directly with an SDR as a sales rep, were part of a larger team that included outbound outreach, or just heard about the idea from a peer or new board member, the majority of revenue leaders are aware of the concept. Just like Marketing and Sales Reps, dedicated outbound reps – commonly known as Sales Development Representatives (SDRs) or Business Development Representatives (BDRs)—can be a valuable source of leads. In fact, pipeline goals often can be too high to get over without this addition to the team.
It seems so simple: designate team members, usually entry-level sales resources, to find and reach out to specific decision-makers to qualify their interest in purchasing your company’s solutions. But if you’ve never started such a team from scratch, the sheer number of questions to answer could cause you to have a breakdown: How much do SDRs cost? How should you set up their comp plan? Is the return worth the investment? Should you create the role internally or outsource it? Which team within Revenue should own the role?
This series will give Revenue leaders the basics if they wanna be startin’ somethin’ with sales development. For the sake of simplicity, all references to individuals doing dedicated outbound outreach will be based on the word “sales”: sales development representatives, sales dev, SDRs.
Part I covers costs and returns of setting up an SDR team and creating an internal team versus outsourcing.
A Change Would Do You Good:
Afraid of getting stuck in the middle with sales dev? Here are a few areas to think about:
-Cost: Overall comp varies depending on location and experience, and responsibilities. Coastal hires, SDRs with experience, and advanced responsibilities like team leadership and early-stage deal qualification will cost more. Budget roughly 1.6x what you think the base salary will be. This will account for variable comp, benefits, and other employment expenses. We’ll cover base/variable splits in Part II.
-Return: The value of deals generated through SDR efforts will vary based on your ACV and the SDR’s volume. Without citing specific dollar amounts, here are a couple of rules of thumb to keep in mind:
- Results vs total cost: Each SDR should generate enough total pipeline and closed won deals to cover their total cost. Use a minimum baseline of 5x total pipeline to total cost, and 1x closed won deals to total cost, and go from there. Anything less than this means that you might see a higher return from other lead sources.
- Results as a percentage of pipeline needed: Each SDR should generate enough total pipeline to account for a meaningful amount of the total pipeline your reps need to cover their quota for the year. Put another way, SDRs should be a Top 3 source of pipeline relative to other lead sources like Marketing, sales reps, channel partners, client referrals, etc. If other sources round out the Top 3 spots, congratulations. You probably have enough good lead generation sources without investing in an SDR team at this time.
-Outsourcing: Here are things to keep in mind with outsourcing SDRs: compare their costs and estimated return to your internal costs and return; ask how they manage their SDRs; ask if SDRs are dedicated to your company or have split focus; ask what metrics are tracked and if you’ll have access to reports and dashboards; get referrals.
Tip: Remember that this route means you don’t have to directly manage SDRs, but it also means that you’re not building your sales bench with future talent. And you’ll still need to keep an eye on results. Not all outsourced SDR teams will produce the high-quality leads you’re paying them to generate.
In the end, you’ll need to weigh the pros and cons of everything above relative to where you are as a company and make the call.