Guest authored by Stuart Watson, Sales Leader and GTM Adviso
Smart founders delegate, but you need to know how and when.
It sounds enticing to hire your first sales development representative. They’ll help you offload tedious aspects of the selling process so you can scale and focus. What could go wrong?
A lot, actually.
Their total compensation is relatively modest, and the idea of having an SDR handle much of the cold prospecting work feels like a clear force multiplier. It would let you concentrate on higher marginal-value activities deeper in the sales funnel. However, if you don’t have a well-defined ideal customer profile (ICP) or repeatable sales process, hiring an SDR runs the risk of crowding your calendar with meetings that have no hope of converting to customers. They’ll let you run faster, but in the wrong direction.
In this quick guide, we’ll break down how SDRs can help, how to know when to hire one, and what go-to-market strategy they work best within.
What an early-stage SDR does
Before we qualify whether your startup could benefit from bringing on one or more SDRs, let’s summarize what the role typically entails.
A sales development representative, or SDR, is defined as an employee who helps you find sales prospects, determine the buyer, reach out, take an initial call, and then hand off qualified prospects for a more senior teammate to close.
Specifically, an SDR is most frequently responsible for:
- Prospecting into (cold or warm) target accounts
- Conducting between 50 and 100 prospecting activities daily (calls, emails, InMails, exploratory meetings)
- Identifying and connecting with contacts in said accounts who can likely benefit from your solution
- Getting a contact who has the power to close a deal to agree that you might be able to alleviate some of their problems
- Arranging for a contact to take a meeting with you or your salesperson accordingly
- Finishing each quarter having conducted 15 to 30 “qualified” or “accepted” meetings or opportunities
An SDR at an early-stage company can offer the additional value of:
- Providing a critical feedback loop around your product-market fit
- Honing your ICP and exploring new customer use cases
- Taking on some chief-of-staff type functions within your sales motion
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Questions to ask before hiring an SDR
If you suspect that your founder-led sales motion could benefit from the assistance of an SDR, we recommend asking the four following qualifying questions:
- Do you have a repeatable sales process?
- Can you handle additional sales meetings?
- Do you have the bandwidth to manage a more junior employee?
- Do you have a go-to-market motion that could benefit from the involvement of an SDR?
Do you have a repeatable sales process?
If so, it means you have an ICP that you’ve been targeting, you have a pitch that resonates with them and allows you to close deals, and you can run the process over and over again to the same ICP without having to customize it.
If you do not yet have a repeatable sales process, stop thinking about hiring someone and focus on building this motion. Bringing on an SDR without a repeatable sales process is a recipe for failure, as any sales hire is a scaling function, not a creation function. You could consider adding your first marketer to focus on building the repeatable process, working alongside you as you drive founder sales, and then expanding to start hiring an SDR.
Can you handle additional sales meetings?
This might seem like a silly question if you’re considering hiring an SDR, but it’s important to ask.
Think about what percentage of your day you spend on sales prospecting and how many initial meetings you’re able to typically manage. If you scaled that meeting production in the form of a dedicated full-time role with an SDR, would you have enough available time to take all of those meetings?
If the answer is “no,” you may want to consider making your first sales hire instead.
Do you have the bandwidth to manage a more junior employee?
An SDR will likely be the most junior employee at your startup. Even if you’ve successfully hired an SDR with a high level of drive and personal autonomy, they’ll still need a lot of personal coaching and feedback.
Despite the fact that you “see them in meetings every day,” it’s crucial that you still have structured weekly 1:1’s with your SDR where you review their input metrics and performance pacing, provide feedback on meeting and job quality, and provide early career coaching.
If you can’t make the time to manage an early career employee, don’t hire an SDR.
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What is your go-to-market motion?
The level of value an SDR can deliver for your startup will depend on what your primary sales motion is.
Direct sales: SDRs are most helpful
If you’re conducting mostly direct sales and your ICP and average contract value (ACV) justify lots of outbound prospecting, engagement with senior leaders, and maybe even field selling, an SDR may be able to add a lot of leverage to your sales process. The SDR role was initially created to support this specific selling motion.
Inbound or PLG-oriented: SDRs are somewhat helpful
If your business is experiencing strong inbound customer interest or if you’re pursuing a product-led growth strategy, it won’t make sense to have an SDR conduct outbound prospecting efforts at this company stage—nearly all product-led companies eventually add an outbound sales motion, particularly as they try to move up-market.
An SDR may still be able to add value in other ways, though. If you’re seeing more inbound interest than you’re able to manage yourself, an SDR could help improve lead response times and qualify inbound interest, so you’re spending less time arranging and running low-quality meetings.
If you’re running a proper product-led growth motion, an SDR may help customers get “unstuck” during their initial engagement with the product and achieve key product milestones. They may also be helpful in engaging different business units within a company already using your product or by helping to target users of your free tier who could be a good fit for your paid products.
Self-serve: SDRs are least helpful
If your primary sales motion is a self-serve model, it's less likely that an SDR would be a value add for your business. Pure self-service motions are typically accompanied by lower annual contract value (ACV), higher churn, and a lower ratio between customer acquisition cost (CAC) and lifetime value (LTV), which makes justifying the cost of another human in the loop challenging.
What’s next?
If you have a repeatable sales process, you can take additional sales meetings, you have the bandwidth to manage a more junior employee, and you have a go-to-market motion that could benefit from an SDR, it might be time to take this important step in scaling your founder-led sales motion.
In a follow-up blog post, we’ll cover SignalFire’s recommendations for recruiting, hiring, onboarding, and managing your startup’s initial SDRs.
*Portfolio company founders listed above have not received any compensation for this feedback and may or may not have invested in a SignalFire fund. These founders may or may not serve as Affiliate Advisors, Retained Advisors, or consultants to provide their expertise on a formal or ad hoc basis. They are not employed by SignalFire and do not provide investment advisory services to clients on behalf of SignalFire. Please refer to our disclosures page for additional disclosures.
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