Build an Outbound Program right the first time

Aaron Ross, CEO

8 April 2019

The following is an excerpt from the 2nd edition of ‘From Impossible To Inevitable‘ by Aaron Ross.

So you want to start an outbound prospecting program, but you’re beginning from scratch. Before you jump in, consider four questions:

  1. What’s the right starting model?
  2. How long will it take?
  3. How much will it cost?
  4. How much revenue can you generate?

Knowing these will help you make realistic plans and reduce delays and failures, so you can build it right the first time.

What’s the Right Starting Model?

1. Internal Team: Hire your own Sales Development Rep (SDR) team that is 100% dedicated to outbound prospecting. If you have the management capacity to hire and train someone, this is ideal. Pros: No one will know your “stuff” better than internal people, it’s the best long-term solution for most companies, and begins your sales Farm Team. Cons: Can be slower to find and train a great SDR, requires more management bandwidth.                                                   

No one will know your “stuff” better than internal people.

2. External Team (Outsourcing): Find an outsourcing service to do the prospecting for you, if you don’t have the bandwidth (or knowledge) to hire and manage someone. Or as a quickstart or interim step until you’re ready to build your own internal team. Pros: It can be faster and simpler than hiring, less (but not zero) management attention, you can tap into a proven system. Cons: Bound to fail when buyers treat outsourcing as a “magic pill” with unrealistic expectations.

3. Parallel (Both): You start an outsourcing project (External Team) at the same time you’re building an Internal Team, to complement each other. Pros: Faster experimentation, time-to-learning, and results. Cons: More expensive, more complex to coordinate.

4. Scrappy: You’re tight on budget (you only want to spend hundreds or a few thousand dollars) and time, so you can only experiment with outbound in bits and pieces. Pros: Begin testing with as little time or money as you have. Cons: Don’t expect meaningful results until you commit a full person or resource to it.

How Much Revenue Can You Generate?

Let’s assume you hire one or more Outbound SDRs. After the startup phase of hiring, training, and ramping, expect . . .
Revenue Per Outbound SDR = (# New Customers Per Month) × (12 Months) × ($ Avg Outbound Deal Size)

Estimating # of New Customers per Month: At SaaS and differentiated companies, one well-trained Outbound SDR can set up 12–20 Discovery or Demo calls a month. Of those, 8–10 end up in the sales pipeline as Sales Accepted Leads (SALs). We’re using baseline averages.
● The criteria is different (looser) for outbound deals than inbound leads. We want Authority, Need, and a Next Step.
We like to see 20% of those SALs close . . . so in baseline scenarios, assume a range of one or two new customers per month per Outbound SDR. Run both scenarios for low–high estimates. Use the same number even if your SDR is prospecting to new divisions of current customers.
● SALs per month can be as low as one per month for large deals in challenging niches or complex enterprises, or up to 15-plus per month for highly transactional SMB sales.
$ Average Outbound Deal Size: Now, take the top 20% highest revenue customers, excluding outliers, and calculate their deal size or customer lifetime value. Use this as your $ Average Outbound Deal Size.
Outbound deal sizes are 3 to 10 times larger than the average of inbound sales because you target bigger opportunities and avoid smaller ones. For example, the average overall deal at Salesforce.com was about $5,000 in annual recurring revenue; the average outbound deal was 10× at $50,000.

Outbound deal sizes should be 3 to 10 times larger than the average inbound sale.

Example:
You sell a differentiated product that your bigger customers commonly pay $35,000 annually. You build a team of four Outbound SDRs. After they’re ramped (assume six months), as a team they’ll create:
Low Case: Yearly add 384 qualified opportunities worth $13.44M in pipeline. Yearly, sign 48 more customers worth an extra $1.68M in recurring revenue. If customers stay five years: Each year you’ll add $8.4M in lifetime revenue.
High Case: Yearly add 480 qualified opportunities worth $16.8M in pipeline per year. Yearly, sign 96 more customers worth an extra $3.36M in recurring revenue. If customers stay five years: Each year, you’ll add $16.8M in lifetime revenue.

How Much Will It Cost?

Salaries make up the bulk of an outbound team investment:

1. Outbound SDRs: For each fully loaded (including benefits and overhead) prospector: $60,000–$125,000.

◦ Geography plays a big role: Do you need a college grad in Mon-
tana, or someone in New York City with experience?

◦ The optimum initial team size is two or three Outbound SDRs that are high-quality “Builder” types. You can begin with up to six SDRs if you have a dedicated manager. Don’t expand the team further until you can measure their results in a dashboard, and see systematically how X effort leads to Y results.

Optional: Recruiting fees.

2. Manager: $150,000 (full-time, fully loaded) or prorate that by time involved if they’re juggling other responsibilities (such as a VP directly manages the team).

3. Sales Tools: Assume $4,000 per year per Outbound SDR for apps such as list-building, CRM, and sales enablement.
True: “Too many founders are penny wise and pound foolish. They’ll spend $10M on product and salaries but less than $2,000 on sales enablement to get more out of that $10M.”—Joe Toste

4. Training or consulting: $3,000 to $150,000-plus.

How long will it take?

Year 1: “The Build Year.” You’re building the program, funnel momentum and pipeline. The flywheel’s begun turning. You should see revenue payback this year—if you execute well—but usually not until late: months 8–12 (we’ll break down why).
Year 2: “The ROI Year.” All the pipeline you’d built prior begins to close, regularly. Now that the flywheel’s turning, and you’re starting off with pipeline, you should see a 3–10× jump in revenue this year from Year 1, depending on how fast you’re growing the program.

Example: Salesforce.com closed an exceptional $1M in annual recurring revenue in Year 1 of the outbound program. It closed $7M in Year 2, a 7× jump. And $20M in Year 3.
If you’re new to outbound, you’ll be sorely disappointed if you expect results (usually deals) in “a couple of months.” If you have a two-month sales cycle for inbound leads, expect four months for outbound deals . . . but with much larger deal sizes.

If you have a two-month sales cycle for inbound leads, expect four months for outbound deals . . . but with much larger deal sizes.

Let’s break down common timeframes for building an Internal Team:

● Hire and onboard first SDR(s): 1–2 months . . . now they have their heads straight.

● Train them, book first 10 meetings: +2 months . . . but many meetings are poor.

● Up meeting quality and quantity: +1–2 months. . . now we see pipeline grow.

● Add typical outbound sales cycle: +4–6 more months . . . hallelujah!

Total: 8–12 months from “decision to do this” until you see deals closing every month from an outbound team. That feels like an eternity when you’re six months in and still haven’t seen revenue! It’s understandable executives might want to throw in the towel at that point. Don’t.

It’s not uncommon for PredictableRevenue.com customers targeting six-figure deals see zero revenue for 10–12 months . . . and then enter “The Million-Dollar Club” with a big contract.

Earlier in this chapter, we talked about “Where Outbound Works Best—and Where It Fails” and challenging niches, such as (but not limited to) hosting, VARs, MSPs, website design, creative/digital agencies, and other crowded spaces. Outbound can work—it’s all about Nailing A Niche and having great people involved. Add six extra months to however long you think it’ll take. But when you get it working, it pays off. Could it pay off faster? Yes. Should you expect it to? No.

The External Team Option: Outsourcing Outbound

If you go with outsourcing, assume the time frame stays the same (3–6 months to ramp pipeline, revenue in 8–12 months). To estimate costs and revenue, for simplicity assume the costs and revenue are the same as hiring one Outbound SDR.
Here are some things to look for in an outsourcing partner:

● There are thousands of them because it’s easy to buy a sales enablement tool, database, put up a shingle, and make bold claims. Have them share case studies and intimate details on how they create success.

● It’s easy to highlight wins, but how they handle challenging situations?

● How specific can they be about when a client is not a good fit?

● What are their metrics and milestones from beginning to revenue?

● Are they email-heavy, phone-heavy, or integrated, and can they tell
you the pros and cons about it to your specific market?

Executives Make or Break an Outbound Program

So you’re going to invest tens or hundreds of thousands of dollars in a program that won’t go off for at least 6–12 months.

The main reason outbound programs succeed, or fail, is executives.
If you are going to do outbound, prepare to do it right. Get the best people or firms you can, even if it takes longer. Assign one of your best people to own the project as their top priority—or else it won’t happen. Push for measurable progress, but be prepared for it to take several months longer than you wish to see revenue.

The #1 Most Important Thing for Predictable Results

Outbound isn’t about email templates. Or social media. Or fancy technologies, apps, or AI. Or the phone, motivation, account-based anything or lists.
Predictable outbound prospecting is about The Dashboard. Without an accurate dashboard, whether you’re building your internal team or using an outsourcing firm, you don’t know what’s working or not, or the “real” results.
Common mistake: Executives create dashboards that combine outbound prospecting metrics and inbound lead response metrics, measuring the inbound and outbound SDRs in the same reports . . . NO! They have to be separate else you won’t get clean outbound metrics.

Inbound SDR (lead response) and Outbound SDR roles, metrics, and dashboards have to be separated.

And with outbound prospecting, accurate dashboards are harder because of (a) inaccurate CRM/SFA usage and (b) subjectivity in opportunity attribution and qualification. How often are your salespeople “doing favors” for their SDRs in accepting opportunities too early? Or are outbound SDRs taking credit for deals that weren’t really outbound?
Everyone has some version of . . .

1. Outbound Activity Metrics (Email, Phone, Social)
2. Outbound Results Metrics (Conversations, Meetings/Demos)
But . . . do you also measure:
3. # Qualified, Audited Outbound Opportunities (or Sales Accepted Leads)—every outbound opportunity needs to be reviewed for consistency and integrity.
4. Outbound Pipeline Creation Rate—the dollar value of qualified pipeline created each month, and is that trending up or down month over month).
5. Win Rates of Outbound Deals—goal: 20%.

Problems arise when leaders are overly focused on the quantity of
activities (calls, emails, and meetings), and not paying enough attention to the quality of the output, or the trustworthiness of the dashboard itself.
Dig into your outbound dashboard and chances are 20%-plus of it is illusion.

Want to know if Outbound sales will work for you? Need help building your SDR team right from the start? Book a complimentary 15-minute assessment now.

Outbound strategy, it’s time to act now.