One of the most important sections of a business plan for any start-up is their growth strategy.
As an unwritten rule, in more cases than not, start-ups build their team by hiring Account Executives (AEs).
Their next step is to hire Sales Development Representatives (SDRs) to further support their team.
SDRs feed the pipeline with qualified meetings and demos so AEs can focus on building relationships and closing the deal. This ultimately drives revenue, allowing a company to grow.
This model has been very successful and is the most commonly used model in growth strategies, especially for high-growth start-ups. Looking at recent stats, it may actually not be the most cost and time-effective strategy.
Many companies are moving towards outsourcing SDRs and here’s why.
True Cost of an SDR
The cost of having in-house SDRs is more detrimental to your bottom line than you think.
The average salary of an SDR is $48,000 with an OTE of $75,000. However, when factoring in recruiting costs, benefits, and a sales tech stack, the true cost of a single SDR ranges from $100,000 – $140,000 per year!
Where 1 SDR costs $100,000 – $140,000 per year, you could outsource and take advantage of a team of SDRs for much less.
Outsourcing frees up resources to focus on other aspects of the business such as better marketing strategies that will further increase the size of your pipeline and ensure that your AEs are kept busy.
In 2010, the average SDR had 2.5 years of experience, whereas In 2018, this number dropped to 1.5 years.
High-growth companies are 30% more likely to hire SDRs with less than 1-year experience.
Someone with less than 1-year experience is most likely not going to be well versed in sales techniques, lead generation tactics and have the resilience necessary to do cold outreach.
This is due to the fact that they haven’t received enough experience to acquire those traits – let alone use them effectively to build a stronger pipeline.
It’s important to add that it’s also difficult for less experienced SDRs to stay motivated as they have to navigate around all the growing pains inherent to start-ups.
Outsourcing allows you to take advantage of the decades of experience that your outsourced team has.
The title “Sales Development Representative” is a very fancy name for a very dirty job.
Let’s face it – SDRs do the raw, hard work of sourcing leads, qualifying them and booking meetings/demos by performing cold outreach.
Assuming that they’re successful, the average tenure of an SDR is only 1.5 years.
Rather than wasting time on recruiting, conducting interviews, hiring, training, managing and motivating 1 SDR at a time who will likely leave after 18 months, you can outsource and use those extra resources focusing on hiring and developing your Account Executives – the people that directly impact your bottom line.
For high growth start-ups, keeping the pipeline constantly fed and ensuring the sales cycle keeps moving forward is of utmost importance.
But eventually, once you’re out of the high growth stage, the focus shifts to offering different verticals and getting more business out of your existing clients. This is where AEs and Customer Success takes precedence over SDRs.
High growth companies employ ~2-3 SDRs per AE. Eventually, this number goes down to 1 SDR per 2-3 AEs.
So what are you going to do now with this team of SDRs that you’ve spent so much time and money building? Do you promote them into AEs or do you trim the fat? Perhaps a bit of both?
Considering the stats above, is it worth investing $100,000 – $140,000 per year in an employee who has less than 1 year of experience and will probably only stick around for 18 months?
Choosing to go the in-house SDR route is proving to be an investment with very little ROI. All things considered, we believe it makes more sense to focus all resources on hiring and developing a strong team of AEs and to delegate the burden of SDRs elsewhere.
All statistics reported here are from The Bridge Group.