Creating a Sales Development Compensation Plan
You’re in the process of building your own sales development team, and by now, you’ve got some things in place. Maybe you’ve nailed down who your Ideal Customer Profile, or ICP, is. You’ve decided on the CRM that you’re going to use, and hopefully you know what to look for in the right type of SDR candidate. You’re going to pay them a base salary that is comparable and competitive (and you know this because you looked at The Bridge Group’s Periodic Table of Inside Sales Metrics). What about their variable, though? How do you know what to “goal” them against, and what do they get if they hit those goals?
In thinking about a comp plan, you have to take into consideration what your clients value most: SQLs. For QuotaFactory, our clients are the folks that have hired us to find fully qualified sales opportunities. For my clients that transition their SDR team from QuotaFactory , this goes for you, too: where you’ve got an internal SDR team, the client is your sales team, regardless of whether your sales development group reports up to sales or not. Your sales reps, the AEs who will be taking the leads uncovered by your SDRs, want all the help they can get, and SQLs are the help they need most.
The guiding thought behind your plan should be this: SDRs need to be compensated for the meetings that happen and convert to an SQL.
On a personal note, I believe that SDRs should get paid for what they brought to the table, meaning that even if they don’t hit their goal, they should get some compensation. Also, consider not comping an SDR on the number of conversations they have because that’s the basis of their job; it’s what they get their base salary for.
So let’s think about this for a second. If we’re using The Bridge Groups stats, the average SDR’s total variable comp comes in around $27,000 per year, or $2250 a month.
For the sake of our example, let’s say that we’re not going to offer any other type of bonus around activity or conversations, and let’s take the available $2250 per month, and assign each project an SQL dollar value. Depending on the difficulty of the sell needs to be a determining factor in that dollar value. For example, if your client requires only six SQLs per month, each SQL on that project is valued at $375.00. If a client requires 10, each SQL is valued at $225.00 (you get the picture). You may think that makes it easier for the reps on the six SQL per month project, but remember, the solution/tech they are selling has been determined to be a more difficult sell than the 10 per month project. You need to make sure everyone is on a level playing field.
To my clients that run their own SDR teams, you do the same thing, only there is no need to have a variation on SQL dollar value. I guess the only reason to make a difference would be if you want to value outbound leads at a higher price than the inbound ones. I’m all for inbound leads, but remember the saying that goes, “with inbound, you get what you get. With outbound, you get what you want.” Outbound sales development just allows you to be more targeted, but that’s a discussion for another blog.
After all of that, here’s what our imaginary plan looks like:
- Meetings Completed: 55% of the SQL value.
- SQL Conversion: The remaining 45% of the SQL value.
Pretty simple, right?
For the 10 SQL goal per month projects, that means that for every meeting that an SDR is able to book for their client that actually happened, they earned $123.75. For every one of those meetings that then converted into an SQL, they earned the remaining $101.25. Oh, and no cap. You cannot cap sales reps. Just don’t. It’s bad form.
In that same example, if you were able to complete 13 meetings in a month and have nine of them convert to an SQL (only a 69% conversion rate), you would earn $1608.75 for your meetings completed, and $911.25 for your SQLs, totaling $2520.00. Also, for the SDRs that don’t hit goal, even if they only saw seven of their meetings happen, maybe because three of them flaked, we would still compensate them for those meetings.
Ultimately, the decisions around what your clients, be they external or internal, value most are going to be the main driver to deciding on how to compensate and goal your SDRs. I’d love the opportunity to hear how others are comping their SDR teams, so please feel free to keep this conversation rolling by commenting below!
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