SDR compensation
Your team is growing and that is awesome! You need to keep the leads moving from marketing into the sales pipeline, but your salespeople are busy closing deals. Your SDR compensation is key.
You also need to hire fast.
But there is a challenge beyond the labor market being a little hot right now; you need to convince someone to take an entry-level sales role with high risk and some of the hardest work that exists.
Why pay an SDR?
The first justification you need for having an SDR is figuring out how well you are converting inbound and outbound leads.
Somewhere, someone (probably a marketer), knows exactly what the cost of a qualified lead is.
The question is, if we get Marketing Qualified Leads (MQLs), what are the chances of converting them to Sales Qualified Leads (SQLs) and then on into being customers?
If your marketing team is bringing in 50 MQLs a month, how many of them are making it to SQL? If the answer is “not very many”, then you can clearly value an SDR a little higher because they will be, in many cases, doubling this conversion rate.
Now that you have twice as many SQLs, your revenue will increase and the cost of the SDR instantly finds ROI.
Salary Considerations
So how do you actually come up with your SDR compensation? Aka what is salary vs. commission? The answer sucks… but it really depends.
Most companies today are structuring SDR compensation around a base salary plus bonuses for meeting goals.
In the industry I’m in, a low base salary would be in the $35k range and a high one would be in the $65k range.
Anecdotally, it seems like there are several salaries and job postings going up in the range of about $50,000 a year.
Typically, these salaries also come with bonuses attached directly to bringing revenue in. Let’s dive into different bonus types.
1. Bonus for attended meetings
This is probably the most common way to reward SDRs for their performance is putting live people on the phone with your salespeople. The upside to this is that there is immediate gratification when your SDRs do well, but the downside is that there is little quality control. If your salespeople only have time for 3-5 meetings a day, then your SDRs could quickly ruin a day with a handful of bad meetings.
2. Bonus for qualified leads
This is very similar to bonuses for set meetings, with a sticking point… the meeting has to qualify to move into the next stage. This works well in some small orgs at first, but can be very dangerous because it puts the livelihood of the SDR in the hands of an AE, something the SDR does not control.
What ends up happening is that the AE (or even Directors or VPs) will take pity on the SDRs that are struggling, but trying hard, and try to bolster “qualified leads”. The problem with that is then you are trading a happy SDR for an inflated sales pipeline.
3. Percent of Meetings that turn into Closed-Won Business
There are a couple of ways to compensate on closed-won business. One way is a straight-up commission for any closed-won business that your SDR sourced. It’s usually a smaller percentage than what salespeople get, but can be quite incentivizing to set up qualified leads or even have SDRs aid AEs in the various tasks while the deal is in flight.
The other way to compensate is a bonus by objective that is a percentage of closed-won meetings. This means that you will be able to have several misses but be rewarded for the successes of the team. Both of these ways must be deployed carefully depending on your industry/ICP/etc., but the unspoken upside is that it also incentivizes your SDRs to stay at your company longer and eventually make the leap into becoming an AE.
(Big hint – SDRs that graduate to AEs are usually top-performers).
Here are a few considerations of what not to do
- Carrot or Sticks based on Activity – This makes no sense and is far too common in every industry. Tracking measurements like dials and talk time lead to some bad actors faking their data so they get a bonus or so that they don’t get in trouble. Instead, try setting proper expectations of performance and holding the team accountable.
- Laissez-faire – Yes… “survival of the fittest” might work for your outside salespeople, but it doesn’t work for SDRs. You do not want to put time and money into hiring an SDR and then set them loose on the world with no direction. If you put time and effort into hiring your SDR, you should also put time and effort into training them on how to qualify meetings and what to say on the phone.
Not investing in tech stack
Would you expect to have a killer race car driving team and then give them no tools, no decent vehicles, and expect them to “be scrappy”?
You cannot do the same thing for SDRs. Your tech stack must include a quality computer, quality headphones, a really good lead generation tool, call recording, and maybe even a tool to help nail talk tracks (Abstrakt – cough, cough).
Have questions? I’ve been in the sales world and even worked as an SDR for a while.
Let’s nail your SDR compensation so send us a message or find me on LinkedIn.