Term sheets can be intimidating as a first time founder. As it is likely the first time you’ve seen a term sheet, the intricacies of the deal can be difficult to…
Why do SDRs Fail?
4 questions to answer that help you avoid prospecting woes when you start specializing sales roles If we measured online chatter alone around sales development in scaling companies, I’d be hard pressed to think of…
4 questions to answer that help you avoid prospecting woes when you start specializing sales roles
If we measured online chatter alone around sales development in scaling companies, I’d be hard pressed to think of many opinions that earn greater approval than the importance of segmenting your funnel and specializing roles to increase your bookings. Everywhere I look it seems my favorite thought-leaders in the industry are singing the praises of sales specialization roles. Yet a survey last year revealed that just over half (51%) the companies asked segmented inbound qualification and outbound prospecting into separate roles.
Where’s the disconnect? I can’t think of any sales leader in any organization I’ve talked to in the past few years that isn’t at least mulling over strategies to optimize the funnel through specialization. But my suspicion is the reason there hasn’t been a greater wave of adoption to this method is the fear that specialization could lead to roles that don’t generate enough revenue quickly to justify their existence within a small company.
When we talk about specializing roles, for most growing companies the first action item is to hire sales development reps (SDRs) and allow the current inside salespeople to stop prospecting a focus only on closing deals. As I’ve noted before, there’s no shortage of people championing the importance of the SDR. It’s even been argued that the best ROI you can get in sales is investing in top-of-funnel efforts.
So why do some founders find their recent SDR hires pour endless hours into cold calls only to come up empty handed when it comes to actually setting up account executives with meetings or demos with quality leads? Usually, it’s your fault. In order for a SDR to succeed, you need the right structure in place to support their work, understand their value and measure their success. To avoid the pitfalls of a bad SDR hire, you need answer the following questions before you bring someone on board.
When are you ready to hire SDRs?
Timing is crucial. Your SDRs won’t succeed if you hire too early and don’t understand how the work of SDRs fit into your current funnel. David Skok outlined two great criteria to meet before you hire a SDR:
- There is enough lead flow to make qualifying potential customers a full-time job for SDRs
- There is enough budget to hire two SDRs–hiring only one SDR might give you an inaccurate view of how effective the role can be for your company
In fact, Kyle Richless noted recently that hiring SDRs in tandem not only sets up the potential for exponential value creation but also helps your sales team develop a safety net to protect against potential failure. “SDR groups learn from one another and share best practices,” Richless wrote. “And if one hire doesn’t work out, the pipeline disruption will be less dire.”
Do you know enough about your deal metrics to understand if SDRs are working?
If you meet these criteria, then it’s time to determine if you have a good enough grasp on how your funnel works and what your customers are worth. Taft Love has developed one of the most thorough examinations of how to measure the ROI of your SDR hires. In his analysis, there are three crucial data points you need to know—but many overlook—before you can reasonably expect a SDR hire to succeed within your company?
- What’s your average deal size? If you can’t determine what an average contract is worth, you certainly won’t understand the measurable value prospecting new leads will create.
- Close rate –You and your current sales reps should be able to determine how many new opportunities will actually close. Otherwise, it’ll be impossible to determine how a SDRs quota for qualifying leads and setting meetings will impact your quarterly sales goals.
- Sales cycle length –It’s the job of the SDR to provide new opportunities for the AEs. But unless you’ve got an outline for the length of time until deals close, you may be saddled with the cost of a SDR for long stretch while you wait for their work to generate real revenue. That’s no issue for large organizations, but for cash-strapped startups the waiting game can be excruciating. Understand the sales cycle length and you’ll keep from underestimating the value of the SDR’s work.
Have you provided your SDRs with the right incentives?
Once you’ve mastered these metrics, you can back into a quota each SDR must meet to make their hire a success. Add up their projected base salary, the costs to train and hire, the costs of equipment and tools and any employee benefits for a new SDR. Then determine how many quality leads you need to justify these costs once you’ve multiplied the goal by the close rate and average deal size. Also, use sales cycle length to determine how lead generation impacts cash flow.
The only thing missing from this equation is incentives. In order to properly motivate your SDRs, it’s necessary to provide variable payment components on top of their base salary. Richless advocates for a simple, quarterly payout system. “An SDR should be able to explain to a friend how they are paid in one sentence,” he notes, “I.e. ‘Schedule 20 qualified demos/month, completed by an AE partner.’”
That’s a great start. It’s best to keep your SDRs accountable to a measurable quota of meetings with qualified leads rather than anchor their bonus to the number of leads they produce that ultimately result in a closed deal. Making an SDR responsible for the work that occurs after the lead is handed to the AE doesn’t make sense. Keep your criteria objective and consistent on what you need the SDR to deliver to the AE and they will be much more likely to hit quotas and feel motivated.
Are you enabling your SDRs to succeed?
Your SDRs are entry-level employees with one of the hardest roles to play in your company: cold-calling potential leads or emailing prospects to set meetings. It’s essential that you recognize the magnitude of this task and provide all the necessary tools to set them up for success.
Get marketing involved. Allow copywriters to review email communication and punch up their language. Let marketing specialists sit in on calls to ensure that your product’s value is being effectively demonstrated and the SDR is showing how your company can solve the prospect’s pain point. This type of marketing-sales coordination benefits both departments and creates a collaborative environment where employees feel more buy-in and SDRs don’t feel like they’ve been sequestered to Cold-Call Island, where no prospects ever want to speak to them and their own co-workers don’t value them.
Are you promoting SDRs?
Finally, to get the best effort out of your SDRs you need attract a talented group to execute. And in order to hire and retain talent, you need to offer upward mobility within your organization. Conner Burt, Chief Operating Officer at Lesson.ly, has noted that one of the greatest values adds you obtain from hiring a SDR is only realized in much later on. “Your building a bench that you can use to promote SDRs to quota bearing sales people,” Burt said. “That’s an intangible benefit.”
Once you bring in a new SDR, make sure they have an understanding of how to work their way up your organization and that the long-term prospects for their career are bright. That sets everyone up for success.