Your company has set aggressive goals for growth in the upcoming quarters, and your team of Sales Development Reps (SDRs) are an integral part of that growth plan. You’ve already realized you need to scale your sales rep hiring quickly to meet sales goals, but how do you know exactly how many people to hire?
Just guessing won’t cut it when your business is counting on the prospecting team to produce results. Instead, consider a data-driven method for effectively sizing your sales team to meet revenue goals, without breaking the bank on salaries and overhead.
Set Specific Goals
At InsightSquared, we segment our sales team into SDRs and closing reps, so one team of reps works on leads to identify qualified sales opportunities, and the other team closes deals. We hand Inbound SDRs leads that come in from trial requests, website visits, trade shows, etc. and it’s their job to turn those leads into meetings or demonstrations with inside sales reps. SDRs are the first step to increasing your total sales revenue, but how many do you need to hit your sales goals? The trouble is, if you hire too few SDRs, your team won’t be working every new lead as best as possible and you won’t gain enough new business to reach your goals. But you also don’t want to hire an army of SDRs without having enough leads to keep them working hard, or else you’ll waste money paying reps that can’t possibly produce toward their target.
There are two ways to think about this problem:
Bottom-up: You’re considering how many leads you can fairly assign to each sales rep, without overwhelming them or leaving them with too much free time. Many folks agree that SDRs should handle between 150 and 300 leads per month, depending on your business and conversion rates.
Top-down: This thought process starts by asking how many SDRs do I need in order to hit my bookings goal? You start with your total revenue and work down from there to find the number of sales reps you need.
Ideally you should use a combination of both of these two methods to find a balanced number.
Use the Equation
Starting with the revenue goals, I built a model with a detailed equation that would factor in a number of variables to find my optimal team size. This is exactly the equation I used to convince our CEO and COO that I needed to hire 5 new SDRs this quarter, and can help you do the same.
Take your Bookings Goal for the quarter and multiply by a buffer of 20%, since not everyone is going to hit their full target goal (your buffer may vary, and is often a topic of hot debate between the VP Sales and CEO). That is how much revenue we target to achieve in total. If you divide the total revenue by your win rate, the result is how much value you need in sales pipeline in order to hit your number. Then divide that number by your average sales price (ASP) to learn how many opportunities you need in your pipeline to hit the bookings goal. Finally, divide by the quota (in opportunities) per SDR, multiply by the percent of the pipeline sourced by the SDRs and divide by the average percent the entire team attains their quota. That tells you exactly how many SDRs you need to hire to hit your goals. Wow, math is fun.
Here’s the equation in simpler form:
Leads + Reps = Sales
Even armed with this equation, you still have to factor in the time it takes to train and fully ramp the team of reps. Your SDRs are not going to be 100% effective on their first day, and probably won’t be for at least a few months. But in general, this is how you determine how many SDRs you need from a top down perspective.
The next step is to see how your goals jive with your marketing goals. If you take the number of SDRs and multiply by the quota for SDRs per month, you’ll get the number of leads you need per month. This is where strong sales and marketing alignment is key. For example, if I have a team of 20 people and want 200 leads per person per month, that’s 4,000 leads per month. You have to have a good relationship with marketing, in order to say, “I need 4,000 leads this month” and not face resistance. If the numbers don’t add up, you need to work closely with leadership to understand where the breakdown is and what should you do as team to solve the issue. Are you going to starve your SDRs? Hire fewer of them? Or spend more on marketing to feed the machine? Those are the basic levers you can pull to affect growth and reach your goals.
When you’re growing your team of SDRs, you have to think mathematically and strategically before you start hiring. You need enough reps to handle new leads, but not too many so your sales team is underutilized. Strike the perfect balance using this easy equation and you’ll hit your goals with ease.