When I was an Account Executive at LeadGenius, I asked prospects this question every day:
“How much is your SDR’s time worth?”
Answers vary, but it’s clear that few sales leaders truly understand the value of their SDRs’ (Sales Development Rep) time.
A common answer goes something like this:
“They’re junior reps and I don’t pay them a lot. Maybe $20 per hour? It makes sense to have them research contact data. It’s cheaper than buying from a service.”
Most SDRs have low base pay and their commission is based on performance, so sales leaders often think that hours spent on non-selling activities aren’t that expensive.
Before we explore just how wrong this is, let’s make sure we’re on the same page. The math we’re about to do is based on three assumptions:
- Your SDR team’s primary purpose is to generate leads, which lead to revenue
- If you give your SDR team some of their time back, they will spend it prospecting
- If the ROI is healthy, then spending money makes sense
Now that we’re on the same page, let’s get right to the point: Your SDR’s time is worth more than what you pay her. The key to understanding just how much is factoring opportunity cost into the equation.
You would not have hired any SDRs if you didn’t expect positive ROI from them. At PandaDoc, we expect 10x ROI. Companies with larger deal sizes expect far more. Marketo, for example, expects 20x ROI from their outbound SDRs.
When I took over as Director of Sales Development at PandaDoc, the first thing I noticed was that SDRs were doing tons of manual work. They sent every email manually, entered every activity into Salesforce by hand, and manually researched each prospect’s email and phone number before calling.
Before I could spend money to solve these problems, I had to show that SDR time spent not selling was more expensive than fixing the aforementioned problems.
Here’s the math I used:
[SDR Time] = [Hourly Pay] + ([Hourly Pay] x [Expected ROI])
In this equation, “[Hourly Pay]” is the total cost to the company (not just their paycheck), divided by the number of hours they work. For easy math, let’s say that their hourly pay was $50 (that’s low, by the way).
I used Salesforce reports to figure out how much revenue the average SDR generated per month. I divided this number by the average monthly cost of an SDR (including commissions). My ROI per rep was just under 6x.
I estimated that we could achieve an ROI of 8x by equipping SDRs with a few tools and services that would eliminate the bulk of their manual tasks. So my Expected ROI was 8.
[PandaDoc SDR Time] = $50 + ($50 x 8) = $450
An hour of SDR time cost PandaDoc $450.
At $50 per hour, the cost of an hour of SDR time at Marketo is astronomical:
[Marketo SDR Time] = $50 + ($50 x 20) = $1,050
PandaDoc has 4 outbound SDRs. If each SDR spends just 1 hour per day doing manual work that could be spent prospecting, how much does it cost the company per month?
PandaDoc: $450/hr x 4 reps x 1 hour x 20 days = $36,000 per month!
What if those 4 reps worked at Marketo?
Marketo: $1,050 x 4 reps x 1 hour x 20 days = $84,000 per month!
Suddenly, saving a few bucks by tasking SDRs with a bunch of manual work didn’t seem like such a good idea. I asked for an SDR tools and lead budget equivalent to 10% of the value of time wasted on manual tasks. It was approved immediately.
So no, your SDR’s time is NOT cheap. Your SDR’s time may be the most valuable time in the company. That’s exactly why good SDRs are in such high demand.
Learn the value of your SDR team’s time and stop tasking them with busy work. Sometimes the cost of saving money is far greater than the cost of spending it!