A strategic SDR compensation plan naturally aligns the objectives of the SDR team with that of the Sales Organization.<\/p>\n\n\n\n
For example, restaurants figured out a long time ago that if they made their waiters share tips with bartenders and busboys, everyone made more money. In fact, the better tippers got their drinks made first and tables turned around faster.<\/p>\n\n\n\n
It doesn\u2019t pay to be stingy with tips. Same thing in Sales.<\/p>\n\n\n\n
Providing decent variable compensation plans for your SDR teams results in significantly greater sales that more than covers the increase in compensation.<\/p>\n\n\n\n
Our analysis shows that by paying out an additional 1.6% of sales in SDR variable comp plan and providing them with the adequate training and content support they need, sales can increase by twice as much. Hard to believe, but that is the magic of using your SDR team the right way and focusing them to build a quality sales pipeline.<\/p>\n\n\n\n
Let\u2019s remember that there are two reasons why the right compensation plan ends up creating the motivation necessary to produce far greater outcomes than the cost of the compensation:<\/p>\n\n\n\n
SDR variable comp plans<\/a> have three components: what you pay for meetings; what you pay for pipeline, and what you pay on revenues generated as a result of the meetings set by the SDRs. Let\u2019s discuss each in some detail.<\/p>\n\n\n\n We said that the SDRs should be measured on the pipeline they build and not on the meetings they set. However, meetings are the vehicles that make pipelines possible, so they do need to set meetings for the sales reps.<\/p>\n\n\n\n By paying a small bonus for setting approved meetings, we encourage SDRs to set more qualified meetings.<\/p>\n\n\n\n How it works: <\/p>\n\n\n\n The real job of the SDR is to build a sales pipeline. Each approved meeting has the potential to do that. To actually go on to the sales pipeline, the following must occur:<\/p>\n\n\n\n Let\u2019s say we pay SDRs $150 per $100,000 of pipeline created (0.15% rate). We track this quarterly, which means that as soon as the sales rep creates that opportunity and adds the dollar amount, it counts.<\/p>\n\n\n\n In the CRM, we pass on the SDR\u2019s name to the Opportunity created, and then run a report at the end of the quarter for all sales pipeline created that quarter (including those that were created that quarter and are now closed won or lost) and filtered by the SDR\u2019s name.<\/p>\n\n\n\n The total amount multiplied by 0.15% is what is payable to the SDR as pipeline bonus.<\/p>\n\n\n\n Let\u2019s say that the SDR turned in a total of 24 meetings of which 17 went on the pipeline, and the average deal size was around $100,000. That means that the SDR created $1.7million in pipe that quarter and earned $2,550 that quarter or an average of $850 per month.<\/p>\n\n\n\n So far, the SDR has added $1,050 worth of bonuses to his monthly pay and overall base salary. Considering the $1.7 million in sales pipeline he generated that quarter, the $3,350 we compensated that SDR for the quarter (including meeting bonus) is a very tiny added cost.<\/p>\n\n\n\n Now we get to the real bottom line\u2013actual, converted sales. Let\u2019s say the SDR consistently puts around $1.7 million in sales pipeline each quarter, and due to the improved quality of the pipeline, the sales rep can improve her closing ratio from 20% to around 25%.<\/p>\n\n\n\n Over a rolling period, she will close around $425,000 in sales performance each quarter.<\/p>\n\n\n\n Let\u2019s say we pay the SDR $500 per $100,000 of sales won. That means the SDR is now getting around $2,125 each quarter in additional bonuses, or about $708 more per month.<\/p>\n\n\n\n That means, our SDR can now expect an average of $1,758 in additional performance bonuses each month. Or in annual terms, this adds $21,096 in variable compensation in addition to his base pay.<\/p>\n\n\n\n If we stop thinking of the sales development profession as an \u201centry level job\u201d, similar to the way working in the \u201cmailroom\u201d used to be looked at, and actually see it as a high-skill craft with countless opportunities created, our sales reps will benefit and our company as a whole will benefit.<\/p>\n\n\n\n We need a holistic transformation of our view of the SDR profession\u2014we need to train them, provide them with the resources they need, set the right metrics and KPIs<\/a>, compensate them, and coach them as the high-skilled professionals they can and should be.<\/p>\n\n\n\nStrategic SDR compensation 1: Meeting Bonus<\/h3>\n\n\n\n
Strategic SDR compensation 2: Pipeline Bonus<\/h3>\n\n\n\n
Strategic SDR compensation 3: Revenue Bonus<\/h3>\n\n\n\n
The SDR as a Professional<\/h2>\n\n\n\n
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