Don’t Use the “SDR : AE” Ratio to Build Your SDR Team

There is a common question from CEOs & VPs of Sales at growth-stage companies looking to scale up their New Customer Acquisition – it’s about how many # of outbound/cold-outreach Sales Development Reps (SDRs) they should have for each AE (closer):

What is the right “Outbound SDR : AE” Ratio for New Customer Acquisition? 

Here is an important thing to note – how many Sales Development Reps (SDRs) you need per AE is actually not the right ratio to consider for your SDR or Sales Org Design.

It is not a function of headcount or people ratios.

Instead, here is how to think about it and this what I recommend to do:

  • VP of Sales and the SDR Team Lead should build a bottoms-up SDR Product Model (start by asking your Sales/Revenue Ops professional to assist with the Excel spreadsheet and then SDR Team Lead should discuss with the VP of Sales to determine on the inputs/drivers and you will ultimately be responsible and accountable for the outcomes)
  • Ensure you have the right inputs of % conversions from outbound/cold-outreach activities (i.e. cold calls, cold emails, sequences, other multi-channel outreach, etc.) and how they drive Meetings Scheduled and ultimately Meetings Completed
  • Check the ratio of “Meetings Completed : Opps Created” or how many opportunities (in the sales pipeline) is an Outbound SDR at your company able to generate per month and per quarter

Therefore an SDR : AE ratio is a function of the above number of opportunities your SDRs can generate from their activities.

Now, about the SDR Production Model – to figure out these numbers, you’ll need to do a bit of capacity planning and you’ll need to assess the following (first have your Sales/Revenue Ops professional pull the sales data reports and review with you):

  • The ideal number of open opportunities each AE should work at any given time (I typically think of 25-30 opportunities open in a selling period as the right number for our company, but it depends on how many your closers can work to hit their number).
  • The percentage of new business you need to be generated by your outbound SDRs vs other opportunity sources such as marketing and partners, etc.
  • How many opportunities your SDRs can source per month.

Let’s break it down one by one.

What is the ideal number of open opportunities each individual closer should work at one time?

During a typical 50-hour work week (no, not 40 hours – this is Sales!), a closer spends all his or her time working the open opportunities in her pipeline. This includes initial discovery calls, product demos and discussions, qualifying opportunities, following up with contacts, working on later-stage opportunities, and so on.

The optimal number of open opportunities per closing rep will vary from business to business. It depends on sales cycle length, average deal size, and business model. Let’s say that a business has a 1-2 month sales cycle (transactional sales model) and an average deal size of $5k – $15k average deal size in typical software (or $ ACV, in SaaS taxonomy). To do all the work sufficiently in a 50-hour week, closers at that company could work 25-30 opportunities at any given time. You can also do capacity planning in Excel and quickly come up with the right number for your business.

What percentage of new business comes from outbound SDRs?

Where do these 30 open opportunities come from? For simplicity’s sake, let’s say you want 50% of your new opportunities to come from your outbound SDR calls. The other 50% comes from Marketing.

How many opportunities should your outbound SDRs source each month?

Let’s assume your closer needs to hit $60k a month.

If your $ACV is $10k, then each closer must win 6 deals to hit that $60k quota. And if each closer’s Win Rate is 20%, then he or she needs to work 30 opportunities in a selling period (i.e. 20% of 6 deals = 30 opportunities).

If 50% of new opportunities need to come from outbound SDR calls, then each SDR needs to produce 15 opportunities per month (i.e. 50% of 30 opportunities = 15 opportunities).

If each SDR is in fact able to produce 15 opportunities per month, then your “SDR : Closer Ratio” will end up being 1:1 – not 2:1 or 3:1, which many sales executives might assume.  However, if you are just starting out and you have not fine-tuned your model and your SDRs are producing only say 5 opportunities per month, then the SDRs : Closers ratio should be 3:1.

So as you can see, it’s really not about the headcount – opportunity production that is the real ratio you should be optimizing for.

So, what do you think? How do you look at this ratio at your company?

Original article by Zorian Rotenberg as a VP of Sales & Marketing at InsightSquared. 

Note: for more information, an additional set of articles were jointly written by us at InsightSquared & SalesLoft (SDR platform) based on our original insights above – https://salesloft.com/resources/blog/sales-development-101-many-sdrs-need-part-1/