Mike Tong
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Across the dozens of enterprise tech companies that I’ve had the pleasure of working with, pipeline (the quantity and quality of sales qualified opportunities), is the primary driver of go-to-market success.
While pipeline is often viewed as marketing’s domain, sales development representatives (SDRs) can be responsible for more than 60% of pipeline in B2B SaaS.
SDRs are “top of funnel” salespeople, making cold calls, writing email outreach or sending outbound mail. They are important even at an early stage or in “sales allergic” industries like DevOps or ITOps. In short, SDRs are a critical part of a company’s pipeline, and therefore, overall success. Despite this, there is little information on how to build an effective organization beyond rote sales playbooks focused on topics like call volume or tech stacks. These topics don’t address the toughest questions, like where to find SDRs or how to get the most out of them. Here are four common roadblocks founders and executives face when building their SDR teams, and the solutions to find success.
It’s best to build in-house
One of the most common questions from early-stage founders is whether to outsource outbound sales or build an in-house SDR team. It is alluring to outsource SDR hiring, as setting up an in-house team involves a lot of time, resources, and effort — and churn if it doesn’t bear fruit. Vendors offer the promise of a no-long-term-commitment stable of SDRs “ready to dial” and expensive software stacks.
However, it is almost always better to build an in-house SDR organization, particularly at an early-stage company. First, outsourced vendors are rarely successful at communicating the nuances and key benefits of your solution, particularly for highly technical products. Additionally, so much of early marketing and demand generation is about learning and experimentation, answering questions like, “What messages resonate with our target customers?” or “Are we even targeting the right customers?” If you’re outsourcing, you might get leads, but you certainly won’t get that learning.
In many cases, outsourced vendors will spam large lead lists to guard against lower conversion rates. This can be detrimental to your brand. You only get one chance to make a first impression and burning leads can have a serious downward effect. You may also end up with customers outside of your ideal customer profile, which then puts strain on the product, customer service and strategy teams.
To control the common risks of building in-house, leverage outsourced vendors like MemoryBlue for SDR training or tools like SalesLoft for building a cheaper tech stack. Finally, be sure to hire a sales leader who is willing to manage both an SDR and account executive (AE) team.
Incentive design matters (but not in the way you think)
SDR incentives are important. The job can be a grind and having tangible rewards is a necessary motivator. However, incentive design can be tricky. If you incentivize the wrong metric, it can lead to suboptimal outcomes. For example, if you incentivize SDRs only on demos booked, AEs are going to see bad demos. On the other hand, if you get too nuanced and incentivize on too many metrics, SDRs may not know what behavior to prioritize and end of quarter accounting will become a pain.
As a best practice, define no more than two criteria for SDR incentives, with the majority of weight given to a sales-accepted lead (i.e., a lead that your sales team believes is worth following up on).
Keep in mind that early-stage SDRs are subject to forces outside their control, such as product-market fit. Therefore, incentive models can become unfair judgements of capability or effort. Hire in pairs to have a control for performance.
Most importantly, most SDRs aren’t at your company for the money; they are there to learn and to grow in their careers, most often toward an AE position. It doesn’t matter how good your incentive system is, if you don’t meet more intrinsic motivators like growth and learning, you’ll have attrition. Being clear on promotion criteria and timelines and designing org structures to enable growth even prior to promotion are good practice.
It’s all about the who — you can worry about the what later
A strong prospect list is the lifeblood of any go-to-market team, not just SDRs. Lists are one of the few areas that very early-stage companies should invest money in as the ROI can be much higher than social ad spend or sales enablement software. Furthermore, lists are getting better and more targeted. Companies like HG Insights have deep tech stack data, and 6Sense embeds intent data to capture likelihood to buy in new ways.
Strong list building also lessens the burden on compensation to optimize SDR behavior. As previously stated, most mature organizations only recognize sales-accepted leads (versus any lead) to ensure SDRs aren’t simply “throwing stuff over the fence.” At the same time, if targets within your list are strictly defined, you can have greater confidence in your AE’s ability to close through a demo.
Pay close attention to the size of the list owned by any one SDR. Particularly for enterprise sales or sales with an average contract value of more than $50,000, less is more. Enterprise SDRs should be focused on multiple stakeholders as well as multiple touches. A single demo could require outreach to five-to-six people at a single account, each with unique 10- to 12-part sequences. Give the SDRs the space to do this right by not overwhelming them with larger lists.
Don’t leave SDRs on an island
If a CEO asked me how to increase their pipeline by millions, my response wouldn’t be to hire a recent college grad with little to no work experience and let them do their thing. Yet, without the proper guidance and support, that is exactly what many first-time SDR hires look like. When it comes to successfully hiring an SDR, who they are is 20% of the formula, what they do is 80%. It is curious, therefore, that many founders and leadership teams focus on hiring and delegate the SDR process to a sales manager or the SDR themselves.
The SDR process is both complex and important. It takes, on average, about 15 touches for a prospect to want to see a demo. These 15 touches are often the first (and only) introduction to your solution that a prospect will see. As such, most ideal prospects will never interact with sales but rather with marketing and an SDR.
In addition to a process that captures value, follows the customer journey, and is technical and nuanced, SDRs need to be tightly integrated into marketing campaigns and sales initiatives. Tactically, this effort might require running weekly campaign interlocks between the marketing team and SDRs, or even having SDRs report directly into marketing.
Pipeline generation at early-stage companies is expensive and time consuming, often more so than the sales process itself. That said, getting it right is likely the most important thing you can do for your business.
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