Building a Sales Development (SDR) Function

Where Sales Development Makes Sense

What does sales development do?

Sales development is the front line of your sales organization – they’re kind of like your Marines, they’re the first ones in.  Their goal is getting your sales team the most qualified leads as possible, so they should be handling all things outbound.  Their job really is to generate interest as mini-marketers, whether they’re doing it proactively with outbound calls, or they’re taking leads in from what comes inbound to your website.

There are lots of different acronyms people use for this role – to me, they are the same, or similar. I’ve heard SDR (sales development rep), BDR (business development), LDR (lead development), ADR (account development), representative ADR.

Building or Evaluating Your Sales Development Function

How many SDRs do you need?

Start with 2 SDRs for every Account Executive – If you’re looking to scale and your marketing isn’t generating sufficient inbound, use SDRs to keep your more expensive AEs busy.  You don’t want to have a ton of AES, which are a lot more expensive than SDRs, and just not enough meetings.  Some companies have 1:1 and some have 3:1, check the ratio with the math of your sales cycle and average deal size: let’s say you have an AE and they need 10 meetings a month in order to hit quota, that really means they need 2 SDRs because you can count on 5 meetings each.

When marketing matures, flip the ratio to 1 SDR for every 1-2 AEs — As marketing and business development grow, you can afford to have fewer SDRs.  If an AE needs 10 meetings a month, maybe 5 still come from the SDR, but now 3-4 are coming from marketing and 1-2 are coming from partners or referrals.  Of course there are some companies where it never makes sense to spend the money on inbound, so instead they keep a higher SDR ratio.

Who should manage SDRs?

AEs should never manage SDRs — AEs should manage just their own opportunities with an SDR, so that is more of a dotted line relationship.

SDRs need to report to the person who’s more passionate about developing them – before you have enough SDRs to justify a separate manager, SDRs should report into a general sales lead or sales director  If you have a strong marketing team, there’s also the argument that they should report into marketing.  The real answer to that debate is that SDRs they need to report to the person who’s going to invest the most in developing them.  You can’t just say, “Oh, they report on the marketing leader because they’re really close to events and webinars, and they handle inbound”, that’s not a good enough reason.

When Director/VP Sales gets to ~7 reports, hire an SDR manager — When your VP of Sales gets to about seven reports ( a mixture of SDRs and AEs), that tends to be a big breaking point, and a good time to get a sales development manager involved.

When you hire for SDR, what should you look for (and where)?

Hire young SDRs with limited experience, and target to keep them in the role 12-18 months – five or six years ago, we would always want to look for at least the one to two years of experience, and that was pretty easy to find because that function was still developing.  Now, as more companies are adopting this type of model, it’s harder to find.  The expectation out there for candidates is that you should be an SDR for about 12 to 18 months, and then you can become an AE.  If you’re enterprise, you can afford to have a SDR with couple of years of experience maybe, and then eventually gets an enterprise role.

Look for applicants who are hungry – The core competencies of a good entry-level SDR are smart and hungry.  For college applicants, I love looking at anyone who’s led entrepreneurial clubs or tried to start a business or a non-profit.  I also flag athletes because I they have that competitiveness.

Test with writing assignments and role plays — When you’re talking to the candidate, look for someone who has really strong phone presence, can communicate well.  For entry level SDRs, it’s always good to have some type of writing assignment in there as well, for example, have them write up some emails and do some mock call role plays.  They’re not going to be perfect right off the bat, but you’ll get a good sense of what you’re going to be getting.

What’s the development path for an SDR?

~30% of SDRs make it to AE with good development help – Having them report to someone who’s passionate about development is important.  The right attentive manager will be able to pretty quickly see, who among the SDRs could become an AE or a team leader.

Create tracks to retain talent – I like to bake multiple paths into the career matrix.  So if someone is not going to make AE, but I don’t want to lose them as an SDR, I’ve built SDR 1 to SDR 2 to Senior SDR to SDR team lead. You have to talk to them and see what gets them motivated; a lot of times they’re just motivated by just purely hitting their number, but maybe it’s just picking up skillsand responsibilities. You can create a non-AE track where they will make more money and they will have more responsibilities to beef up their resume.

What are the first steps in establishing an SDR function?

Define your ICP – Don’t rely on tribal knowledge, actually write out your ideal customer profile, and have materials around it.

Aggregate a playbook – A playbook (in the SDR context) is a set of documents that are easily accessible on the ICP, product training, guidelines around what you want the CRM to look like, call and email metrics, email templates, etc.

Build the tech stack – Make sure you have at least a well-configured CRM, prospecting tools, and video conference tool (more on the tech stack below).

Create the comp plan – Do this before the first SDR starts, spell out how do they get paid, when they get paid, and how you came up with the quota.  Share it with SDRs in their first week.

How do you train new SDRs?

Create a real onboarding training schedule – The first 2 weeks are important, plan out that onboarding schedule with trainings, certifications, etc.

Plan a 90-day ramp — Some companies tend to say it should be 60 days, but I think a 90 day ramp to quota is more fair.

Update the playbook quarterly – The playbook should be owned by the person who leads the sales development function, but it should draw on information from other functions like product and marketing.

As you get bigger, formalize sales enablement — I like to group sales enablement with operations if possible because to take training burden off the sales leader.  As you get bigger, you can also invest in a tool like a Chorus or Gong for our call recordings and tracking.

High level what are the metrics for monitoring and comping SDRs?

Activity metrics –  to make sure things are trending in the right direction before you have sales results

  • Calls – used to be ~80 calls per day, but I’ve seen that come down to ~50 proactive cold calls, using more focused lists vs. a scattershot approach
  • Emails – no more than 300 emails per day, otherwise Gmail will just shut you down.  Your entire domain’s spam score goes up.
  • Demos/discovery calls set up – typically around 12 per month, 8-10 sales qualified leads per month

Compensation metrics – compensation anchored to sales outcomes

  • Demos that become SQLs – an SDR might earn $100-150 per qualified lead
  • Demos that become closed deals – an SDR might earn 1% of ACV sourced

How this works at a sample company – let’s take a mid-market sale, a $25K ACV, targeting a 25% closed-won rate. Base comp might be $40-45K, plus variable comp with on-target earnings of $20-25K, based on:

  • 8-10 qualified leads per month once ramped, 100 per year at $150 each, for ~$15K
  • ~25 of those opportunities would close, for ~$625K in total bookings, of which the SDR would get 1% of ~$7K

Should SDRs optimize for quality or quantity in outreach?

Don’t get too carried away with personalization.

There’s a real push for personalization, but I’ve done a ton of different tests on this, and I don’t see the value in too much time on a hyper-personalization.  If anything, SDRs should do 20 to 25 of those emails per day, and I should take about two or three hours, and the rest is all templated emails and cold calling.  It’s a better use of time to create really good templated emails.

How big does the lead database need to be, and do SDRs add to it?

Seed new SDRs with accounts, and ask them to find more – In the market I typically see ~500 accounts per SDR.  I go a little higher, about 800 to 1,000.  Every new SDR walks in with at least half of what that number is, and they’re expected to continue to prospect to add that on their own every single day.

Work 2-3 contacts per account – This varies some by buying cycle, but for mid-market ($25 or $30K deals), I typically see 2-3 people involved in the sales process.  The best thing for an SDR to do is always try all the key decision makers, so for an HR tool it might be HR, someone in operations, and someone in finance.

How do the SDR and marketing databases work together?

The SDR database feeds into the marketing database, but sales people shouldn’t think too much about marketing emails.

I’ve seen companies try and do very complicated account-based marketing where they spell out that on certain days marketing will send emails, but on other days SDRs will send them. I think it’s just too confusing. If you’ve engaged with someone and they’ve responded, I’m good with adding them to the marketing list.  But those emails are different than sales, so it’s okay to have both channels open at once. Marketing is more informative, whereas the sales function is more assertive, “Okay, let’s book a demo, let’s move forward, let’s see what’s going on.”

What’s in the SDR tech stack?

CRM – with a sales engagement sequence build-out

Video conferencing – e.g. Zoom

Prospecting tools – e.g. LinkedIn (to find the right contact) and ZoomInfo (for the contact information)

Sales engagement tool – e.g. Outreach, Salesloft

As you scale your sales team to 6+ people, consider adding account intelligence, livechat tools, or ways to share and track content (e.g. docsend).

Parting Advice

What are the most important pieces to get right?

Clear understanding of ICP – Make sure you know and agree upon exactly what leads are sales leaders/AEs looking for to accept.

Build the foundational tech stack – The core pieces really help SDRs be more productive.

What are the common pitfalls?

Not establishing a clear progression – Not all SDRs can be AEs, good career pathing will help you keep more strong performers who are better as SDRs.

Not sticking with a strong onboarding plan – Just winging 2 weeks of onboarding and hoping will not work well.

Over-complicating the comp plan – Complicated plans are hard to understand and tend to change more.  That’s the worst thing for a salesperson, changing their comp plan.  Set it for a full year and make sure finance is okay with it.

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