The True Cost of an SDR Team
We all know building an SDR team costs money – but, how much?
Readers of Predictable Revenue often come to us for help building their first sales development team. Getting started with outbound sales is an exciting time for a company – they’ve had some success with inbound and grown the organization year over year, but now it’s time to pour gas on the fire and really accelerate growth.
But over the past 10 years – and hundreds of clients later – we’ve noticed that companies beginning their outbound journey tend to all stumble in the same key areas: they don’t validate their target market, they try to manage outbound off the side of their desk(s), and they don’t budget for success.
We’ve covered how to validate a target market in a previous post, so instead of covering that ground again we chose to focus this post on what the ideal composition of a first SDR team is, what getting outbound off the ground will cost, and how long it’ll take before you see ROI.
Predictable Revenue is a bootstrapped company, so I’m keenly aware that there is a big difference between the “right thing to do, in theory” and “what you can afford.” As such, my goal here is only to show you what some outbound best practices look like, how to identify the areas that may pose additional risk, and help you decide if you want to dive into outbound straight away, or wait until you have enough resources.
The right team
First things first: you have to understand your talent inventory. Do you have someone internally that wants to take on the role of an SDR full time? Do you know a talented SDR leader or an in-the-trenches SDR that can give you a jump start? Or, are you starting from scratch?
It’s helpful to have someone on the initial team with either intimate knowledge of your company or the world of sales development. This internal understanding will give you a head start when you’re ready to get on the phone. Of course, you can absolutely train new team members if you don’t have anyone ready internally, it will just increase the time you spend training over the time you spend actually selling.
So, what does an ideal initial SDR team look like?
The perfect starter team consists of one SDR manager and two SDRs. From a managerial perspective, you definitely want someone full-time to own the success or failure of this project. If you don’t have an SDR Manager, this responsibility can belong to your VP or Director of Sales, if they can dedicate the majority of their time to the SDR team.
Why does running an SDR team require so much bandwidth? Well, it all starts with hiring the right people – and hiring the right people takes a lot of time. From resume review, to phone screens, to in-person interviews, you could easily have an SDR manager dedicate 40% of their time to hiring when you’re initially rolling out your SDR team. The rest of your manager’s time, short as it may be, should be spent building out other prudent functions like a sales playbook, designing internal processes, working on sales tactics, and getting the right tech stack implemented.
Full disclosure: not having someone in this managerial role is where most projects go off the rails. If you don’t have someone that can handle this position full-time, do not pass go and do not collect $200.
Once you have your team hired and their first day arrives, expect things to pick up quickly. Not only will the aforementioned managerial responsibilities continue to evolve, onboarding new team members becomes a priority. Onboarding is different for every organization, but it should take two weeks, at minimum, to do it well. From there, you’ll need to shift into a ramp-up period (ours, for instance, lasts four weeks). The ramping period doesn’t require as much hand holding as onboarding does, which will give your SDR Manager some valuable breathing room.
After the six weeks of onboarding and ramping has concluded, and so long as no additional hiring is needed, an SDR Manager, at this point, can turn their attention to execution: weekly 1 on 1s, development and goal-setting conversations, shadowing, coaching – the list goes on.
This is why having someone comfortable with the practice of outbound sales and the world of the SDR can be so helpful: there are so many responsibilities and potential roadblocks that having someone with previous experience will reduce risk.
From an executional perspective, it’s generally accepted that hiring two SDRs is most effective.
In fact, to paraphrase Jason Lemkin, when you’re doing something new, hire two:
“If your first rep does poorly, you’ll have no idea why. The rep will blame you, your crappy product, your crappy company, your crappy lack of marketing. Which may all be correct. But if the rep is a bad fit, that may be the real reason. You just won’t know.
If your first rep does well (our experience), you’ll still have no idea why. Does the product sell itself? Is it the rep’s suave phone skills? Is your deal size, and are your customers, representative of the ones you’ll really get in the future? Or is this rep only good at a certain type of customer — and are you leaving other potential customers behind? You just … won’t know.”
Jason Lemkin on hiring salespeople
An added bonus of hiring two SDRs is the camaraderie they’ll build. Having a colleague to learn from, and lean on at times, while figuring things out is critical. The SDR job is tough, and support from colleagues will go a long way.
Finally, if you’re new to hiring, please go buy your whole team “Who: The A Method of Hiring.” It was a total game changer at Predictable Revenue. You can also check this Bloobirds online tool to discover if you have enough SDRs or should be hiring a few more people.
Now that you know who you need, let’s have a look at what that need will cost. For detailed data, check out The Bridge Group’s SDR Report (note: data is from 2018, 2019 isn’t available yet).
An SDR’s salary
Expect this to range from $60,000 – $80,000 OTE, depending on your market. Those of you based in San Francisco or New York should expect to pay in the range of $80,000 – $100,000 OTE.
Use our FREE SDR Calculator to calculate how much a sales development representative will cost you, and get a clear picture of when to expect the SDR to generate revenue.
An SDR Manager’s salary
Hiring someone with SDR experience is rare, so if you find someone great, don’t be afraid to invest. If you can’t find an SDR manager, some other options are promoting a coachable SDR with a desire to manage people, or a hiring sales leader with no SDR experience.
You’ll want to budget for tools that will help your SDRs: a CRM, a sales engagement tool, some data providers, and a calendar tool. Here are a just few thoughts on each:
- CRM: go with Salesforce. If you’re going to eventually build a team bigger than two SDRs, don’t mess around with anything else.
- Sales engagement tool: Outreach/Salesloft are the best tools on the market for SDRs. If your target market requires a heavy phone component, you may want to consider bolting on a power dialler like PhoneBurner or Connect and Sell.
- Data provider: ZoomInfo, DiscoverOrg, and LeadIQ are all great for finding contact information. LinkedIn Sales Navigator, as well, is essential for Account Research.
Make sure you include room in your budget for a sales operations resource to tie all of the above tools together. The SDR Manager can do it, and may have to in the early days, but you probably want them spending their time coaching instead of getting technology to work together.
This is something that usually goes unaccounted for: if you’re building and scaling a team, there are costs associated with hiring, training, and onboarding, for instance.
Rent & coffee (and other general office expenses)
Of course, your company likely has an office – and that comes at a cost. And last but not least, unlimited coffee to keep the SDRs fire burning (jokes aside, your SDRs will be working hard, and will need a pick me up, or many, throughout the day).
I used the city of Austin, Texas to get some base costs. Austin represents a nice middle ground – it’s not San Francisco, nor is it a small town. I’ve thrown all those costs in a spreadsheet that you can copy and add your own data to.
Here’s a list of the expenses we included:
Market rates: Austin = $107,591
|Full time SDR||40 hours / week||$60,000||$60k – 1 x Full-time SDR (40 hours / week)|
|SDR tool stack||Salesforce, Outreach, ZoomInfo||$6,000|
|Facilities||Rent, Coffee, Benefits, etc…||$6,720||$6,720 – 1 x Facilities (Rent, Benefits, Payroll, etc…)|
|SDR Manager||7:1 ratio||$6,667||$6,667 1 x Part-time SDR Manager (8:1 TL:SDR ratio)|
|Director of Sales||20:1 ratio||$11,667||$11,667 1 x Part-time Director of Sales (20:1 SDM:SDR ratio)|
|Sales Researcher||4:1 ratio||$4,038||$4,038 1 x Part-time Sales Researcher (4:1 SR:SDR ratio)|
|Sales Ops Specialist||20:1 ratio||$7,833||$7,833 1 x Part-time Sales Ops Specialist|
|Recruiter||30:1 ratio||$4,666||$4,666 1 x Part-time Recruiter|
Now that you have the right team in place and an approved budget, let’s look at some realistic timelines to start seeing results. On average, we see most companies taking between 18 and 24 months to get a team off the ground. Even during the best of team implementations, there are many different places organizations get stuck. So, think of building outbound team as a 12-month journey, with a couple extra 3 month detours.
Here are some rough timelines and a graph that shows your estimated return.
Q1 – Onboarding – hiring / building the sales stack
Q2 – First meetings
Q3 – First pipeline
Q4 – First closed deal
Q5 – 1 deal per month
Q6 – 1+ deals per month (stronger close metrics as tenure length increases)
For a rundown on potential roadblocks during onboarding, see our post on milestones.
Here’s how the above sheet works out in terms of a return on investment (note: this is also a best case scenario and could easily be pushed back 3 – 6 months). The trick here is to make sure that you’re prepared to make a long term investment in building a new revenue channel.
Outbound sales will bring you predictable revenue in a way other company functions simply cannot provide. So, take the time to do it right. And, of course, understand just how long doing it right will take.
Need help building your SDR team? We can hire them, train them, build their playbook and their sales stack for you. Book a free discovery call!
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