• Do You Know Your True Business Development Costs?

    Posted On Monday, March 6, 2017 by Evan Lamolinara

    Little-to-no knowledge of financing and pricing is often cited as one of the most common reasons why small businesses fail. Obviously you can't expect to maintain a profitable business unless you know how much money is being spent, and how much money is being earned. But not all of the costs associated with running a business are obvious. Some are more discreet, making them to difficult to account for.

    It's a good idea to go back to the basics when analyzing your business's development costs, beginning with the value of your sales development representatives' (SDRs) time. Some business owners assume it's more cost-effective to allow their SDRs to perform multiple steps in the sales process, including initiating contact with prospects, following up with those prospects, and even researching information about prospects and leads. As a result, these business owners may pay their SDRs a flat per-hour wage, such as $15-$25 per hour.

    Unfortunately, the aforementioned model is highly inefficient and will probably end up costing business owners more in the long run. The primary function of an SDR is to generate leads, which will hopefully convert into sales (assuming all goes well). If SDRs are busy juggling dozens of small tasks, they won't be able to focus on what really matters: generating leads. Therefore, business owners should consider “giving back” some of their SDRs' time so they can attract more leads that ultimately convert into sales. 

    Here's some ideas to "give back" sales development time:

    When analyzing the value of an SDR, you have to think in terms of return on investment (ROI). If you pay an SDR $20 per hour but he or she only generates $15 per hour worth of leads and sales, it's not cost-effective keeping the SDR on board. On the contrary, you'll end losing money with a negative ROI such as this. So, what kind of ROI should you expect from a typical SDR?

    There's really no easy way to accurately predict exactly how much revenue an SDR will generate. However, some business-to-business (B2B) sales companies report ROIs in the range of 10-20x from their SDRs.

    The bottom line is that an SDR's time isn't cheap, nor should business owners treat it as such. Allowing your SDRs to focus their time and energy towards generating leads will usually raise their ROI. With that said, business owners should monitor their SDRs' performance to measure KPIs like conversion rates, sales, etc.

     

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