Can SDRs Become Great AEs?
Early in my career, I worked as a Sales Assistant to a team of Account Executives (AEs) at a leading radio and media company. I saw full-cycle sales firsthand and helped many salespeople prepare proposals for their prospective/existing clients. Before that, I sold merchant services door-to-door to small businesses.
I went on to enter the world of pure lead generation or “sales development” as the modern day business world calls it, and quickly learned how to be effective.
In my experience, many of the skills required to be a closer and a sales assistant translated well to Sales Development.
The roles are different on paper, but does that really mean a Sales Development Representative (SDR) can’t do the job of an AE and vice versa? SDRs and AEs aren’t so different and have many similar responsibilities. They’re both managing a pipeline, cold calling, handling objections, and above all, showing patience.
Although a SDR transitioning into an AE role is doing a different job, they'll still use many of the same best practices. Even an AE who has never been an SDR is still doing much of the same work that SDRs do on a daily basis, and they're still in a performance-based role:
- They both have to do prospecting
- They both have to understand and speak their buyer’s language
- They both have to follow up with prospects persistently
- They both have quotas to meet every month and quarter
- They both get paid based on their performance
The main take-away I’ve come to find through my professional journey is that sales is sales. If you have developed the right skillset and mentality, you can sell anything if given the right tools. I’m thankful to work with a team that equips me with what I need to succeed. RevenueZen has done a killer job providing effective and innovative tools to help myself and my colleagues thrive in the sales game.
Salespeople are like artists. An artist finds inspiration in their surroundings and creates art with the resources they have readily available in that moment. Sales is no different. Whether you’re an AE or SDR, you have to be smart in your strategy, painting the ideal picture for your clients with the colors you’ve been given.
...oh, and both SDRs and AEs can work well remotely!
Segmenting Buyer Personas With a Matrix
Before you go to market, you gotta know your Buyer Personas. You know, what your B2B buyer looks like.
I'll bet you have something like this written down somewhere, if you've hired full-time marketers at your company:
- Avatar: HR Heather
- Company Size: 500 - 5,000 employees
- 5+ open job postings
- 15%+ y/y employee growth
- Located in United States, especially large metro areas, but has international locations too
- Mostly Director/VP/CxO of HR/Recruiting
...etc.
And that's all great! Now, how do you take this concept and apply it cleanly to outbound prospecting?
How should your sales development team go after the VP HR of a 520-person company differently than the Recruiting Manager at a 4,200-person company?
Getting Granular with a Persona Matrix
In reality, your total customer segment can probably be distilled into a number of separate buyer personas, each of which should be spoken to differently when prospecting. My preference is to map this out in a simple spreadsheet, which your team can then review and approve. Your lead generation team will love it. You can also use this to easily set up your sales acceleration platform of choice, like Nova, which has a feature specifically for this. Other common choices include Outreach.io or Salesloft.
Here's a screenshot of what that looks like (heavily simplified):
Your complete persona is going to be much more granular and detailed than this. But this is the high level: this is basically what you can give to your lead generation team, when you need them to generate lists of Accounts and Contacts you want to go after.
Writing Persona-Specific Sales Emails
Now, your job is to speak to each of these personas differently. Instead of writing a single outreach sequence, you're going to write 6. Or, at least, you'll configure your sales acceleration tool to automatically frame the introductory credibility statement and the value proposition differently, based on who you're reaching out to.
For example, maybe the CEO and CHRO always care about getting interviewing & hiring done more quickly, though the CHRO also cares about compliance, whereas the Director of HR mostly is concerned about workplace culture fit when it comes to new hires. The HR Manager and Talent Manager just want their day-to-day lives to be easier, and may be willing to refer you to the decision-maker if shown a compelling value proposition.
This means you need to write a value proposition related to:
- Decreasing time to hire
- Ensuring hiring process legal compliance
- Improving culture fit
- How front-line managers can save time
Then, you have to set it up so that you're delivering the right value statements to the right audience with your software.
What's the result of all this?
You're delivering a relevant message to the right person! You're one step closer to achieving personalization at scale!
If this sounds complicated and you want help making it happen, reach out to us and we'll lend a hand.
So You’re Thinking of Outsourced Sales Development?
I’ll be the first to admit it: as a founder, the idea of outsourcing anything is nerve-wracking. It’s tough to give up control of a business function to someone off your payroll, and tougher still when that function involves being the first line of communication between your company and its important prospective customers.
But then uncertainty sets in: if you’re going to build a Sales Development team yourself, how do you do it? You’ve never been a VP of Sales before, that wasn’t your career path. Or maybe you have a VP Sales, but their focus was never heavy-duty prospecting.
Either way, you want professional help. And you’re on a timeline: your burn rate is ticking, and that cash won’t last forever, even if it felt good to close that last round. You need growth, and you can’t wait around to build pipeline.
Picking an Outsourced Sales Development Strategy
Let’s assume you’ve decided you want to outsource the Sales Development process to a 3rd party and break down some of the considerations:
- Balancing cost vs quality (and what does “quality” even mean?)
- Balancing fixed vs variable fee structures
- What else you need, aside from purely the appointments
How Much Should You Budget for This?
Quotes for outsourced sales development range from as low as $2,000 per month to total all-in costs as high as $13,000 per month, for the work performed by a single Sales Development Representative (SDR).
AT LOWER PRICE POINTS, YOU’LL OFTEN SEE:
- SDRs who are contractors of the agency, rather than permanent full-time reps
- Offshore SDRs whose first language is not English
- Your SDRs work on multiple accounts (I’ve seen 2, 4, and even 8 accounts per SDR)
- You provide the company with leads; they won’t generate any for you
- You provide them with scripts and messaging, that they will follow religiously
- You won’t be paying them any commissions or performance fees
- They’ll work out of your (or your Account Executive (AE)’s) inbox, rather than your own; OR, they’ll work out of their own inbox but will simply forward “good-sounding” replies to you once they receive them
- SDRs will exclusively use templated emails, and will not use the phone or social media to contact prospects
ON THE MORE-EXPENSIVE SIDE, YOU’LL NOTICE MORE OF THE FOLLOWING:
- You work with permanent, full-time W-2 SDRs working at the agency with their own commission structure, plus incentive and promotion plans
- The SDRs are on-shore, in the US or Canada, or at least native English speakers
- The SDR(s) is/are fully dedicated to your company, and don’t work with other clients
- The agency generates complete lists of leads and shares them with you
- You’ll receive intensive guidance from the agency’s leadership in a thorough partnership that uncovers the ideal sales channels for you to use
- You work together to develop and refine your Buyer Persona and the sales messaging alongside each other
- The agency asks for performance fees to incentivize over-performance
- The SDRs will fully set appointments so you or your AEs don’t have to worry about administrative work, and the SDRs will take care of rescheduling no-shows
- SDRs will leverage personalized email, account research, follow-up calls and cold calls, social media outreach, their own personal network, handwritten letters, small gifts, and other creative marketing channels to set appointments for your company
...phew. That’s a lot to think about, right? Keep in mind as well that plenty of companies live in the middle of these structures, and borrow some elements of both.
How Should You Pay for This?
Similar to hiring a salesperson, you'll pay more overall when the rate is more variable and commission-based. An outsourced SDR provider that charges 100% variable fees is going to need to command a higher overall price point since they have the difficulty of dealing with that variability in their pricing model. The benefit to you of only paying for outcomes becomes a business challenge for them. They manage this challenge by charging a much higher premium.
On the other hand, if you pay only fixed service fees for the work, you'll probably pay less overall, since the provider enjoys more consistency in their revenue stream.
Other agencies (like RevenueZen) have a balance between these two: they charge a fixed service fee but also ask for a performance fee to align incentives. Some companies will partner more deeply with you, in the sense that they'll be open to a revenue-sharing agreement plus a lower fee per appointment or a lower service fee. We’ve even seen situations where the agency will turn around and invest part of their fee structure back into your company in the form of a stock purchase, intimately tying your success to theirs.
It's also important to know how the agency's SDRs are incentivized. If you're only paying the agency a fixed fee but the agency's SDRs earn commissions, then the agency has a perverse incentive for the SDRs only to do well enough to keep your business without doing too well. If the SDR overperforms by too much, then the agency may actually lose money on commissions to their SDR.
There is no right or wrong model for how you should pay for this type of service, in the same way that there is no right or wrong way to pay your internal salespeople. (For more on that, check out a short piece I wrote on this topic).
What Else Do You Need?
Here’s where I’ll encourage you to be humble and honest about your strengths and weaknesses.
If you have any type of sales background, you may think that you have it all figured out, and you “just need the muscle”, with no additional help beyond that. But having a second set of experienced eyes on your sales strategy is almost always a good thing, especially if that 3rd party is not engrossed in your company’s culture, habits, and way of operating. That lets them think independently and ensure you have diversity of thought in your strategic planning process.
The most successful and scalable sales development campaigns are collaborative efforts between the SDR, SDR Manager, Sales Ops, VP of Sales and the executive leadership team. You need both strategy and execution and you can’t do one without the other.
If your market is simple and easy to reach, your deal size is low, and your sales process is well-defined and proven, then maybe you just need help with a few extra SDRs to run with the plan that you’ve already built, without changing too much.
But if you’re still developing your processes and making your pipeline generation efforts repeatable and scalable, or if you sell to a sophisticated buyer, then you need an agency that can provide strategic guidance alongside simply providing SDRs. You need an agency that can look at your current sales strategy and tell you what you’re doing wrong and how to fix it.
At the end of the day, you want to drive your cost of sales as low as possible, while still thinking about the long-term impact on your brand of the kind of prospecting outreach you’re doing, and the opportunity cost & time you might be missing out on by working with the wrong partner. Your organization needs to be always learning how to conduct your revenue development initiatives better and better.
Working with an agency whose leadership team stays involved with your company consistently to keep everyone accountable while continually innovating will pay deep dividends in the long run. Interview a potential partner first (using some of the points listed in this article) to understand their approach in depth, before you engage.
Do Sales Objections Exist?
NO, NOT REALLY
There are no "objections". There are only business concerns, and it's our job to figure out if they're legitimate or not.
Think about it: when a client or prospective client is "objecting to" something, either that objection has merit, or it doesn't. If I call up Comcast and ask for 100 Gbps internet for $20 per month, my objection doesn't have merit. If I call and say that they mis-charged me for the plan that I am supposed to be paying for, then my objection DOES have merit.
It's our job as salespeople and great SDR leaders to help clients understand the reasons behind their objection: the underlying concern.
Unpack Sales Objections to Identify the Underlying Concerns
Are they asking for a discount? What part, the up-front fee, the monthly rate, the billing frequency, the payment terms, the usage pricing mechanism...?
Are they concerned about switching costs? Do they mean the time they'll have to spend themselves, the time their team will spend, the monetary cost, or the risk of giving up their current solution?
If you think that every objection needs a 'rebuttal', you're probably irritating your clients and coming across as a high-pressure, grating salesperson.
Instead, solve issues by first looking to understand their perspective and the underlying reason for their concern. If after you unpack it the concern is indeed a legitimate one - meaning, you would have the same concern if you were in their position, and it's fair - offer whatever solution you can, while still being fair to yourself, to address it.
"Yikes, This Means You Might Lose Deals!"
Yep, it does. If you properly address your clients' concerns by first diving into the underlying motivations and concerns, then you might find an objection that you can't resolve while still being fair to both of you.
That means it's not a good fit. That's okay! And it's MUCH better to help someone realize your solution is not a good fit, than to sell them anyway.
Life is too short to sell off bits of your integrity for cash ;)
On the bright side, if you look beyond the superficial "objection", you'll usually find that concerns are either fair, in which case you can address them with cooperation and mutual collaboration. If the concern is unfair (where they are basically flailing, trying to get the best price possible in a way that isn't fair to you), then a combination of humility and firmness works wonders!
Above all - you'll win more good deals by treating "objections" as concerns that can be legitimate or not, rather than as jabs or straights in a verbal boxing match.
Close deals, not doors.
Picking a Lead Generation Strategy Based on Deal Size
"Hustle", they say. "Grind", they say. You have a software product or a service, and you want to grow it. So you sit at your desk, wondering where to begin.
Adwords? LinkedIn? Hire a PR firm? Commission-only salespeople? Suddenly, the word "telemarketing" pops into your head, and frustration takes over.
The universe of lead gen (demand generation, sales development, awareness, marketing, and about a hundred other terms for roughly the same universe of thing) is WAY too big to digest all at once. Even the most experienced sales and marketing leaders -- in fact, I'd say ESPECIALLY the most experienced sales and marketing leaders -- aren't experts in every method.
You have to pick exactly what works well for your company. Fortunately, there are a few easy ways to do this.
And, before we continue: "Growth Hacking" is just a fancy rockstar/ninja type word for someone who is pretty good at dabbling in everything. I say this as someone whose title used to be "Director of Growth" at a 200+ person VC-backed company!
Strategies by Sales Price
IS YOUR AVERAGE ANNUAL REVENUE PER CUSTOMER GREATER OR LESS THAN $8,000
If your Avg Sale Price is GREATER than $8,000 and you have a budget of between $3,000 - $30,000 per month to spend on marketing, consider the following techniques, ROUGHLY in order of effectiveness:
- Outbound Sales Development (cold emailing/calling/social)
- Content Marketing (SEO), Social Media, plus Live Chat
- Referrals & networking -- this one is actually low budget
- PR & Earned Media Outreach
- Partnerships
- Paid ads
IF AVG SALE PRICE IS LESS THAN $8,000, CONSIDER THE FOLLOWING TECHNIQUES:
- Content Marketing (SEO) & Social Media, plus Live Chat
- PR & Earned Media Outreach
- Automated cold email
Strategy Breakdown & FAQ
WHY IS OUTBOUND SALES DEVELOPMENT NOT A GOOD IDEA IF YOU HAVE A <$8K AVERAGE PRICE?
Because it's expensive. Similar to how asking current customers for referrals and networking to find new clients requires a lot of high-value humans to be spending intensive amounts of time to show results, it's usually not worth doing if you won't make more than several thousand per year from a client.
WHAT'S WRONG WITH PAID ADS?
Nothing, in general! But it's devilishly tricky to get right, and it's extremely saturated. If you know PRECISELY what you're doing, or have hired a person/firm who does, then by all means go for it! But it's one of the most tempting, yet hardest things to do right unless you're familiar with marketing already.
WHAT DO PEOPLE USUALLY MEAN WHEN THEY TALK ABOUT "PR"?
Most people who aren't in PR or marketing think of PR, and imagine getting mentioned in big publications, links in big news stories leading readers back to their website, or entire stories written about them. In other words, what's called "Earned Media".
For example, if Forbes decided to write the dramatic, compelling, and heartfelt story of how your company's product was the definitive choice for homemade, gluten-free, DIY, vegan juice-making (with its own built-in Chia Seed terrarium), you'd probably get a lot of sales from people checking out your company (JuiceMaster.io).
PR can refer to a lot of other things, too. Relating with the public can range from maintaining a company's forum, handling press inquiries reactively, chasing down journalists, creating an online industry publication that is indirectly related to your product; that kind of thing.
SO LET'S SAY I WANT TO DO OUTBOUND SALES DEVELOPMENT OR CONTENT MARKETING, WHERE DO I START?
Talk to a professional. Even if it's scary to think about investing into a marketing technique that you aren't familiar with, someone who's done it a million times before, and created millions in revenue as a result, can walk you through what it looks like, requires, and - yes - even what it feels like to run a particular type of marketing.
RevenueZen itself only specializes in two types of lead generation - content marketing and outbound sales development - but we know folks that do everything.
Get in touch with us if you want to chat through the revenue goals you're hoping to accomplish!
Sales KPIs to Focus On
SO, YOU'VE GOT A SALES TEAM... NOW WHAT?
But things aren't quite going according to plan. Reps aren't hitting their goals, or maybe you'd like to increase their goals but you know they'd miss if you did. What do you do?
First, Track the Basic Sales Funnel
First, track three simple metrics:
- Discoveries per week. How many introductory meetings is each rep holding with qualified prospects? You may prefer to track 'demos' instead. Whatever the most important 'meetings' metric is, put that on a dashboard and track it daily.
- Pipeline creation. Decide on a qualification standard (BANT, ANUM, MEDDIC, IDGAF, FOMO, whatever acronym you prefer...), and track how many meetings turn into sales-accepted opportunities. 50-80% of meetings converting to pipeline is the benchmark, depending on where those meetings are coming from.
- Closed revenue. Or bookings. Or ARR. Or however makes the most sense for your company.
Let's do an example. Let's say your product's average deal size is $25k ARR. If the quota your reps need to hit is $45k ARR per month, and they convert 30% of pipeline into ARR, and 65% of discoveries turn into Opportunities, then:
- To hit $45k ARR, they need to each generate $150k of pipeline per month
- To generate $150k of pipeline per month, they need to hold 9.23 good discovery meetings per month. Round that up to 10 for good measure, and add 1-2 as a cushion :)
If you convert 2% of cold prospects into discovery meetings, then to hit 9-12 meetings per month, each AE will need to be contacting 450-600 people per month.
You may instead prefer (as I do) to hire SDRs, invest in marketing, spin up PR, and get other forms of demand generation going, and to then increase AE quotas. That way, they're holding more meetings but doing less prospecting. Either way, the equation is the same.
Then, Dashboard It
Build a dashboard, in Salesforce or otherwise, that updates in real time based on the activities and deals being logged in your CRM. Set it up as follows:
- COLORS! For each metric, color code so that a result of 80% of goal = Red, 100% of goal = Yellow, and 120% of goal = green. That way, it's easy to see how reps are doing: all green/yellow means it's okay, red/yellow means they need work, and all green means they're killing it, and you should buy them a coffee or a beer and praise them publicly.
- Actually look at it. Check the dashboard daily (but not 12x/day, don't be a dashboard junkie), and monitor results that seem deeply different from what should be happening.
For example, if meetings are Red, pipeline is Yellow, and revenue is Green, what does that mean?
Your AE has been doing well recently, but is not set up for success next month, since the pipeline is drying up.
Each module should look something like this:
(The typical deal ARR here was in the $6-10k range.)
If metrics are "in the red", you know to take a deeper look at those.
Once everything is green/yellow consistently, you know you can scale, and it's a matter of expanding your team and growing!
3 Things Great SDR Leaders Do
When I was halfway through my tenure as the Director of Sales at inDinero, a growing Silicon Valley tech company, I stepped into an SDR team that was setting an average of 7 appointments per month per rep, to one that was setting 21 appointments per month per rep. Even while simultaneously increasing variable compensation, we were able to triple the overall ROI of the team in several weeks.
As a humble student of sales development leadership, I’d like to share a few things I learned while my team went through this amazing transition. Credit goes to the fantastic SDR team (love you all, always!) that held strong through this, and to the skilled management team I worked alongside to make this happen.
DATA Is Your Religion
It can’t be emphasized enough that the first thing you need to leave at the door is your ego. Use your experience as a guide, but be open to questioning everything you’ve done in the past. Come up with criteria that will tell you if new ideas hold merit, then test those ideas with discipline.
→ Not sure whether a radically-different approach to email copy will work? Give it a go on a small subset of contacts. Wow — looks like it was effective!
→ Heard that putting emojis in your emails will increase response rate? Try it for a few weeks. Oops, it had a horrible reply rate — back to the drawing board.
Always follow the bright spots. If one rep is doing something very right, encourage her to quantify what it is she’s doing right, and to share it with the team.
Track your efficiency ratios. Start by figuring out the percentage of calls and emails that result in positive outcomes, contact other sales leaders to benchmark your performance, and figure out where the lowest-hanging fruit is. That will tell you where to focus your efforts: is it increasing activities, or refining your reps’ communication skills?
Always start with the lowest-hanging fruit, because these big improvements will cause your team to build excitement and MOMENTUM, which is incredibly important to morale and future performance.
Don’t Believe the HYPE
I’ve seen SDR teams — and, individual reps on SDR teams — work very well with emails, and others very well with calls. In every organization, and for every individual sales rep, there is a balance to be struck between emails, calls, social touches, etc.
Your job as a sales leader is to 1) find the optimal balance for your product, and for your team as a whole — then, 2) to provide an environment with sufficient guardrails to ensure everyone generally follows best practices, but that the star performers can innovate within those guardrails to find the method that works best for them.
In other words, establish a data-driven best practice for how to be a great SDR at the team level, and then at the individual level. Make it EASY to do the job, thus giving star performers room to be what they are: STARS.
Don’t make the mistake of taking sides on “whether cold-calling works” or not, or on similar debates. I can’t stand those LinkedIn posts from people debating whether calling is dead, or not. It’s one technique of many — figure out whether it has a place in your organization, or not, and iterate over time. When material changes happen to your target market or your sales rep profile, consider forming a new hypothesis as to whether a specific technique should be used.
Be as open-minded as possible, without letting yourself be sucked down wild goose chases.
Drive Best Practice Adoption Through INCENTIVES
Take a look at your compensation plan, and ask two questions:
- Are commissions based on something that is wholeheartedly under each sales rep’s control?
- Is total compensation set so that it’s roughly market-competitive, but also makes financial sense for the business?
People lose motivation when their pay is determined by something outside of their control. Models where SDRs are paid based on the closed revenue resulting from their appointments are very tough to swallow: while that may protect the business as a whole, this is a crutch that you shouldn’t rely on, because it will hamper performance. People need to know that their performance will closely correlate to their earnings. This will reinforce good behaviors and motivate your team.
At inDinero, we scrapped the ‘closed revenue’ portion of SDR compensation, and it made an enormous difference in the team’s performance.
Simultaneously, I worked with Accounting to make sure that the compensation model was scalable, and wouldn’t break the bank in the long term. Sure enough, the cost rate of the team went from 75% of ACV to 25% of ACV within just a few months and stayed below 30% thereafter.
Should You Build an SDR Team? -- Part 2
If you haven’t read it already, first read Part 1 of this blog post, where we go over the simple method of measuring ROI from an SDR team.
Measuring True ROI
In Part 1, we talked about how to use the ACV generated by an SDR to determine whether outbound SDRs are a good investment. But, for companies that sell a sticky product with a high Customer Lifetime Value, ACV alone doesn’t take this into account! Even so, future years’ cash is not as valuable as this year’s cash.
So, to solve these issues, we’ll change the ROI formula a bit:
Outbound Customer Lifetime Value $ / Total Associated SDR Costs
Here are a couple tricky things to be aware of:
- Especially if you have negative net churn (but even if you don’t), apply a discount to future-years’ cash flow so that your LTV is realistic, and not infinite. More on this here. Simply put, cash flow in year 2 of the customer’s lifetime is worth 90% of what it is in year 1. Year 3 cash flow is worth 81% of what it is today, and so forth. A typical discount rate to use is 10% per year.
- Lifetime Value (LTV) includes gross margins, so make sure you bake in the cost of service here.
TRUE LTV PER CUSTOMER
Here’s an example of how to figure your true LTV:
- Annual Revenue Per Account (ARPA) = $15,000
- Gross Margin = 85%, so annual Gross Profit Per Account = $12,750
- Churn = 4.16%/mo & average customer lifetime = 2 years
- Actual LTV = $12,750 + [ (1–10%) x $12,750 ] = $24,225
PRODUCTIVITY FUNNEL WITH LTV
Let’s assume that our fully-loaded cost per SDR is still $82k/yr like we worked out in Part 1. Now we know what a deal is worth long term; let’s refresh the Productivity Funnel!
Here again is the funnel we’re expecting from a decent SDR pulling in 18 meetings per month:
216 Meetings > 130 Opportunities > 39 Deals
So now, at $24,225 per customer of LTV, that’s $944,775 of value each SDR is generating, each year they are productive. Their financial productivity is thus 944k LTV / 82k Cost = 11.5x ROI. Very decent!
So, Should You Build an SDR Team?
With this level of modeling, you should be able to accurately compare investing in an outbound SDR team with the opportunity cost of not doing so. If you’re above 8x ROI on demand generation when using LTV in the calculation, then you’re good to go!
If the numbers make sense — GO FOR IT!
Remember: data is your religion. Good luck out there!
Should You Build an SDR Team? -- Part 1
As someone who’s built or helped build multiple Sales Development teams, I wanted to pass along the formula that I use to roughly estimate whether an SDR team will be a good investment for a company.
If you’re coming into this from outside of the SaaS world, SDR stands for Sales Development Representative. They’re also sometimes called ISRs, BDRs, ADRs, MDRs, and all other sorts of nonsense. An SDR is an inside salesperson focused solely on prospecting and setting up opportunities for an Account Executive to close business.
Simple Way to Measure ROI
Achieving Return on Investment means you’re getting back the cost of your investment, and then some. For now, we’re going to leave out calculating the NPV/LTV, and just focus on cash we get from the SDR’s first year.
To do this, we’ll use the following formula:
Total Annual Contract Value from SDR / Total Associated SDR Costs
Loaded Costs per SDR
Remember, the total costs associated with an SDR are more than their annual OTE. Bake in payroll taxes, allocated Salesforce/lead gen/healthcare costs, plus management overhead of 10–15%. So first, here’s an example of what an SDR’s fully-loaded annual cost would look like:
- Total Compensation: $65,000
- Payroll Taxes (10% of comp): $6,500
- Healthcare/Salesforce/Nova/Slack/Gmail/Food/Coffee: $750
- Management overhead (15% of comp): $9,750
- Total associated costs per SDR: $82,000
Revenue Productivity Funnel
Now, we know what an SDR costs, but now we need to figure out how much revenue we can expect per SDR!
A decent quota of meetings per month per SDR would be somewhere in the 18/mo range in order to earn an OTE of $65k/yr; let’s assume 60% of those meetings turn into Opportunities, and 30% of those Opportunities turn into customers, who on average pay $15,000/yr.
With those numbers, here’s our Meetings conversion funnel, per year:
216 Meetings > 130 Opportunities > 39 Deals
At $15k per customer of ACV, that’s $585k of ACV each SDR is generating in their first year.
Great! So now we roughly know their ROI: 585k ACV / 82k Cost = 7.1x ROI. Not bad at all.
IS THIS DEFINITIVE? WHAT DOES THAT NUMBER EVEN MEAN, ALEX?
First, put in your company’s own funnel metrics into my formulas above. If you can already get more than 7.1x ROI (or whatever your personal result was) from your existing demand generation initiatives, then hold off on building that SDR team.
Most companies in this deal size range see 2–5x ROI on demand generation until their marketing is SUPER dialed-in, so in this case, outbound is definitely a good strategy to consider.
WHAT NEXT?
Read PART 2 of this post, where I talk about how to model a customer’s LTV properly. We’ll go from “back of the napkin” math, to something more robust.
How to Talk About Your Competitors
Ever heard a salesperson or founder smack-talk their competition? Kinda feels like Silicon Valley Mean Girls, right? Yep - sounds something like this:
FMLSoft? Yeah, it’s nothing like what we do. It’s totally half-baked, and they don’t give a shit at all about their customers. I actually met their founder once, he was a real ass. And he kicked a dog as he walked away.
If you don’t hear that last sentence unprovoked, press it enough and you’ll usually hear it emerge: the real source of the hate. And for those of you that are thinking, “Nah, I don’t do this… maybe just a little, but not that bad” — fine. But you still need to think about where the bitterness is coming from.
When People Bash Competitors, What’s Going On?
Insecurity. Pure and simple.
Some of the biggest insecurities I’ve noticed are personal grudges. The most common way I see these come up is when a person’s first thought about a Competitor company is the people they dislike who work there (including the founders). This inevitably shows when they’re asked about said competitor: the hate flows, and focuses on their grudge, not on what’s relevant to the prospect, who is doing the asking.
The prospect’s internal reaction?
Wow — that sounds heavy. And also, I don’t give a shit at all about these guys’ gripes. Get me out of here, I’m not interested in coming between the Hatfields and the McCoys.
Clear that hate from yourself, and force yourself to recognize that sometimes, you can be an asshole too — and you’re probably exaggerating a lot of your negative opinions about this company, even to yourself. People aren’t perfect, and you’re no angel.
This doesn’t apply to legitimate ethical issues, but here’s the way to bring those up:
FMLSoft? Yeah, on the whole great people who work there, have met several and they’re solid folks. Feature-wise, we definitely overlap in a lot of ways! More unfortunately, and I’m not sure if you heard about this, but they’ve had a lot of key people leave recently — hard to know if you can believe what’s on Glassdoor, but the COO’s leadership was given as the reason for many of those departures. Can never be sure, but that certainly gave me pause when I read it. I admit, it echoed my own thoughts when I met him in person several months ago.
Here’s the Difference...
It’s okay to bring up negatives, but it should be clear that you are only doing so in order to give a complete and honest opinion, and that if you left the negatives out, you would be giving incomplete information. Stick with that mentality, and you’ll be better able to give a fair assessment. It’s impossible to remove all bias, but do what you can.
The next big form of insecurity I encounter often when working with salespeople as well as leaders is insecurity about your product: a refusal to acknowledge that a Competitor’s product is any good, or does any of the things that yours does. If you take this too far, you’re probably guilty of over-exaggeration, and your prospect will sense this and mistrust you. And they’d be right to.
Here’s a paraphrased conversation I had with a friend recently:
Man, I really just need to get out there and eat FMLSoft’s lunch if we’re going to survive. We lost a couple really solid deals last week to them — I’m worried.
I was taken aback: the two products are completely different. Sure, they’re both options to consider initially for people who are, broadly speaking, considering different ways to increase revenue at the early stage — but they operate in entirely different ways. Theirs is a software, yours is a SaaS+Service; theirs offers no help with crafting messaging, yours does; theirs costs $800/mo, yours costs $6000/mo. One is a cool software, the other is a full-service solution that could take the place of a full-time position.
So, Why Worry?
If a potential buyer truly understood the competing solutions in enough detail, aren’t the options different enough that only one of the two would be the right choice?
And if so, isn’t it better to simply be completely transparent and help buyers understand their options in full, so they can come to the conclusion that your product is the one they should use of their own accord?
Here’s the hard part. The corollary is that, if you’re transparent about the options and confident in the value of your product, you need to be prepared to tell a buyer that a competitor’s product — not yours — is where they should go, and calmly walk away from the sale.
Not many people can do that, but if you can, it sets you apart from the kind of salesperson that bleeds bias and emotional over-involvement with every word.
When I was the Director of Sales @ inDinero, a software/service accounting hybrid solution, we sometimes appeared to compete with Bench.co, a similar product. In my opinion, we were never competitors, IF you knew enough about each product. Most of Bench.co’s customers were companies that were really too small to see much value in inDinero, and many of inDinero’s best customers were the kind of companies that needed more than Bench.co’s business model was set up to provide.
Here’s how I coached my sales reps:
There’s no need to talk about Bench in comparison to inDinero. In fact, the people there are great, and you should lead with a genuine compliment when discussing them. Instead, put the focus back on the buyer: talk about what kind of companies are a great fit for Bench.co, and what kind are a great fit for us. Then, just work with the buyer to locate where they are on the spectrum. It should never be about “who’s better”, but all about “what’s right for the buyer”. Plus, they’ll come to their own decision this way, without any pushing or persuading.
And guess what: Bench.co’s reps did the same thing. We worked together sometimes, traded referrals when it was appropriate, and there was no bad blood.
Our sales reps were able to develop more of an unbiased, help-people-first attitude, which made them great relationship managers. It pushed them to simply be masters of the industry product knowledge since they knew they could rely on that knowledge to get to a “Yes” or “No” as quickly as possible during the sales process.
When it comes to talking about competitors, I’ll sum it up like this:
LET THE BEST PRODUCT WIN
With good enough coaching skills, and a good enough underlying product, there should never be a need to ‘bash’ a competitor. It’s the right thing to do, and it’s good sales.
