Measuring SDR Teams
Sales teams are often composed of two primary roles:
Account Executives (“AEs”), the classic sales professionals who bring in the money by signing new customers and
Sales Development Representatives (“SDRs”) who support the AEs by finding prospects, setting appointments or helping with follow-up
There is fairly widespread agreement about what an AE does and how to compensate them. By contrast, I’m often surprised by how much the role, measurement and compensation of SDR teams vary… sometimes even within the same company.
Small team vs large team
In the early days of founder-led sales at a startup, one or two SDRs are often the first sales hires. They provide natural leverage to the founders by sourcing, qualifying leads and helping to follow up. This is great! And if it’s working, there is no need to get technical with their measurement or pay at this scale.
As the salesforce grows past about 10 people, however, it’s important to estimate the revenue impact of the SDRs — just as we do AEs — so we have numbers to guide our future hiring plans. This may sound obvious, but I’ve noticed that SDR teams are sometimes measured by indirect metrics (e.g., appointments set) rather than tying their impact directly to a team’s new revenue.
One related experiment
Years ago I was involved in a large experiment of SDR support. The gist was something like this:
A team of maybe 100 AEs was split into two comparable groups of 50. To the first group, ~50 SDRs were added to provide 1:1 support on lead gen. The second group of AEs got no extra support. We then tracked performance over many months and found results along the lines of these:
In short, the team with SDR support did generate more revenue… but at a significantly lower ROI. So in that situation, we made the obvious choice to stop SDR hiring and focus more on the higher ROI AE approach.
Of course, that was just one situation, and each company will be different based on its pricing, customer base and so on.
Yeah but what does a smaller team do?
Most startups don’t have a 100 person team with which to run this kind of test. So how do we decide where our SDR program sits between “high ROI” and just “nice to have?”
While there is no perfect answer, here are a few suggestions:
Directly connect each SDR with one (or more) AE, so that all associated revenue is partly attributable to them
Measure sales leaders on net contributions (new revenue minus headcount costs), not just revenue. If you only measure the revenue, SDR support becomes a free good… and who doesn’t want a free assistant?
Let AEs choose how much support to get: e.g., “Yes, we will fund an extra $100k for you to have an SDR, so long as you add $400k to your quota”
Let strong SDRs experiment with closing deals; you may find that some can quickly ramp into being AEs
In Conclusion
SDRs (and junior salespeople generally) are great. They are some of my favorite folks to hire, they can be invaluable to founders in the early days, and they can build a bench of future AEs.
However, SDR teams are inconsistently managed and measured. So before we scale up too much, let’s setup the role to drive revenue… and then measure the results accordingly.