How do you turn your company into a well-functioning revenue engine? Maximize the performance of your sales development team.
According to The Bridge Group, $3 million a year is the average pipeline produced by one single SDR (sales development representative) in the SaaS industry. For many companies, SDRs are responsible for generating 30 to 45 percent of the new revenue, which underscores the relevance of the role and the importance of getting it right.
Here’s how much pipeline your SDRs should be building – and which metrics to track to get there.
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The difference between inbound and outbound sales teams
Before we break down sales goals and metrics, it’s important to understand the difference between inbound and outbound sales teams. Sales development teams are typically split between outbound teams and inbound teams.
Outbound SDRs will usually be responsible for opening new “cold” accounts that had no previous exposure to the vendor. They will often be given a set of accounts to engage with, or a predetermined set of industries or verticals to penetrate, and be more targeted in their approach.
Inbound teams are typically responsible for filtering, qualifying and converting inbound leads into sales conversations. They follow up on leads generated by marketing teams, such as those who downloaded an e-book, attended a webinar, or requested a demo.
Determining whether a company needs an inbound SDR team or an outbound SDR team (or both), depends on the maturity of the company as well as the number of leads the marketing team produces. Typically, companies will have both teams in place or SDRs that handle both inbound and outbound.
What determines the best team structure and how much pipeline responsibility each team takes depends on how reliable the inbound engine is. Less-established vendors usually need a stronger focus on outbound while more established and well-known vendors tend to have a larger focus on inbound.
SDR metrics and KPIs
Setting clear metrics and targets for inbound and outbound sales development teams to hit is fundamental to track their success and demonstrate the impact they can make on the company’s bottom line.
So, where do you start when it comes to defining the best SDR metrics to track?
The answer is simple: revenue.
Flipping the sales funnel
By flipping the sales and marketing funnel and working out the conversion rates from one stage to another, companies can set clear targets for their sales development teams and get fairly predictable on how to attain them.
Here is an example of how to work it out backward:
Let’s assume a company has a revenue target of $1 million. Their average deal size is $100,000, which means the company needs to close 10 deals to hit quota.
Assuming their closing rate from opportunity to closed deal is 25 percent, it means that they have to generate $4 million in pipeline to be able to hit their $1 million revenue target.
Knowing that their pipeline target is $4 million, the pipeline sources need to be defined.
To keep it simple, let’s assume that 50 percent of the pipeline will be generated by the outbound SDR team and the other 50 percent will be generated by the inbound SDR team that will be qualifying and converting leads generated by the marketing team.
So, that means each team (outbound and inbound) has to produce $2 million in pipeline.
By knowing how much pipeline each team has to produce, companies can then figure out how many sales conversations need to take place in order to produce that amount of pipeline.
Outbound SDR metrics
Operatix conducted a study with 150 SDRs to analyze the typical productivity of sales development reps in multiple verticals within the SaaS Industry. The study revealed that each SDR delivers on average 15 meetings/sales accepted leads (SALs) per month, with an expected drop-out rate of 20 percent, which means 12 meetings/SALs attended a month by the sales team.
On average, 1 in 2 SALs (i.e. meetings) generated by an SDR will lead to a next step in the sales process–a next step being anything from a demo, a POC, a proposal/opportunity to a sale.
So, assuming six meetings turn into a pipeline opportunity at an average deal value of $100,000 one SDR will produce $600,000 in pipeline in one month.
Going back to the example of $2 million being the outbound pipeline target, it means the company either has to hire three or outbound reps to reach that target in a month or spread the target across three to four months.
Outbound SDR activity levels
For outbound SDRs to reach their average 15 meetings a month, there is an expected volume of touchpoints and engagements to be executed daily.
The graph below demonstrates how many phone calls and emails or social touchpoints are expected, as well as the typical conversion rates:
Inbound SDR metrics
Inbound metrics vary a lot more than outbound metrics since the source of leads and level of intent play a fundamental role in conversion rates.
For lower intent leads such as e-book downloads, webinar attendees, content syndication leads, whitepaper downloads, tradeshow visits, etc, the expected conversion rate from lead to meeting will be around 5 percent to 10 percent.
High intent leads such as demo requests or meeting inquiries will typically convert anywhere from 75 percent to 80 percent.
What size should your inbound SDR team be?
Defining the size of a company’s inbound team is directly influenced by the volume and quality of inbound leads generated by their marketing team.
Each inbound rep should be able to handle about 15 leads per day and assess if these leads are a good fit from a company level, geography and vertical/industry, as well as job function/seniority level.
The final objective of an inbound rep is to qualify the leads in or out, engage with them, and ultimately set up an introductory call with an account executive that can then take over the sales process.
So, ultimately the volume of leads generated by the marketing team will define the size of the team. Seeing as one inbound SDR can handle 15 leads a day, that means approximately 300 leads can be followed up per month, which ultimately defines how many Inbound SDRs are needed in a team.
If the influx of inbound leads isn’t sufficient to justify the hiring of a full-time inbound SDR, companies often opt for a hybrid SDR that handles outbound as well as inbound. Alternatively, vendors can choose an outsourced sales partner to handle their Inbound leads or assign them directly to account executives.
What you can expect from your sales development team
Since sales development teams play a fundamental role in generating sales pipeline, it’s important to understand how to set SDR metrics and KPIs that can help determine what success looks like and what productivity levels can be expected from them.
For outbound SDRs, an average of 15 meetings booked per month is expected, while for inbound teams, the conversions vary significantly depending on the level of intent and source of leads (5 percent to 10 percent conversion for low-intent leads, and 75 percent to 80 percent for high-intent leads).
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