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 a 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.

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There is no one-size-fits-all answer

It depends on your company!

Generally, the larger your deal size, the more you’ll want to lean toward working with higher-quality, higher-priced partnerships with appointment-setting agencies.  The smaller your deal size, the more you can (and should!) get away with paying less, for higher-volume outsourced work.

You may or may not want the most expensive choice, or the cheapest option.  Ask yourself: do I want a partnership that acts as a close, seamless extension of my internal team?  Or do I want to try to do the lion’s share of the strategic work myself and ask an offshored team to execute on it?

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 ours) 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).

 

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Keep in mind...

As a rule: people do what they are incentivized to do.  Agencies are an organized group of people, and are no different.  Make sure their pricing structure incentivizes them to look out for your success as well as theirs.

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.