Keep reading for our justifications on these costs.
Sales Development Reps can be a great way to fuel the growth of your business but the cost of running an SDR team internally can quickly add up.
We put this post together as a number of our prospects were toying with the idea of setting up their own SDR function without a clear understanding of the actual costs associated with it. After all, you just hire a marketing grad, get them a phone and laptop and tell them to book meetings right?
We outlined the costs above but in this section we’ll justify the cost of each component that makes up the $97,000 per year.
Base Salary - $55,000
You could try and pay less than this if you’re hiring outside of Auckland but in Auckland this is about as low as you can go to attract quality candidates. Made up of a base salary of $50,000 and then a loading for Kiwisaver and Holiday pay taking it to $55,000.
Management Overhead - $16,667
Best practices suggest you need one SDR Manager for every 6 SDRs.These can’t be player coaches, they have to be dedicated to the process of managing, coaching, training and onboarding new reps. Now if you’re only hiring one or two reps you’re still going to have to do these things, it may just come from an existing resource, regardless the time will need to be spent. SDRs are usually sales people or marketers with limited experience in these kinds of roles. The cost here is $100,000 (all in comp for an SDR Manager) divided by 6.
Bonus Structure - $12,000
You need to incentivise your reps to perform. This usually takes the form of a bonus payment for each meeting they schedule. This works better as an incentive than a % on closed revenue because the pay off period for the reps is shorter which helps to drive positive feedback. You’ll want reps to be able to earn at least 20% of the base again in commission if they’re hitting target and so again you’re looking at another $12,000 a year here.
Training Costs - $2,000
As outlined in the overhead management section of this post, SDRs are generally inexperienced when it comes to sales. It may be their first sales job or their first real job. In order to get them performing you’ll need to invest in a structured training and on-boarding programming. Whether you execute this internally or use an outsourced provider you’re going to have to bring them up to speed with some kind of formal sales training otherwise you’ll churn through a ton of reps looking for one that can figure it out on their own.
Tools - $6,500
An SDR will struggle to deliver meaningful results if you don;t equip them with the right tools. At Sales Science we believe there are three key areas you’re going to have to invest in order to give your reps a chance to succeed. These are data, a sales engagement platform and a CRM.
The cost for tools in these key areas can range anywhere from $35,000 per rep, per year, (for the gold standard) to $5000 per year which will give you enough to get by. The minimum package would include the following kinds of tools:
Hubspot CRM and Sales License ($1920 per year)
Lusha - Lead Intelligence Software ( $1500 per year)
Linkedin Sales Navigator ($1200 per year)
Seamless.ai - Lead Intelligence Software ($1,920 per year)
Recruitment - $5000
To recruit externally you’re going to pay 12-14% of the candidates salary in compensation to the recruitment firm. At $50,000 that’s $6-7000.Let’s assume you're going to manage this internally instead. Here you’ll probably have a senior team member spend at least 2 weeks of total time creating and posting job ads, screening resumes, scheduling interviews and managing the offer and signing process. The opportunity cost of this time would be worth at least $5000.
So that brings us to a total cost of $97,167. What’s worse, the average tenure is only 14 months so you’re going to have to spend the money on recruitment and training almost every year in order to keep this function operational.
So if you’re going to do it make sure you do it right. The rewards are certainly there if you execute a solid outbound prospecting strategy, but if you just hire a junior rep and hope it works out, you could see a big chunk of budget disappear before you know it.
If you want to speak to me about how we could implement this for you for much less, give me a call on 022 674 5327.