SaaStr AMA: Building Your First SDR Team with Brendon Cassidy (EchoSign/LinkedIn) and Kyle Porter (SalesLoft)

Missed the SaaStr “Ask Me Anything” with Brendon Cassidy, VP of Sales extraordinaire (EchoSign, Talkdesk, LinkedIn), and Kyle Porter, CEO of SalesLoft? No worries. We’ve got you covered!

Today we’ve got an in-depth, 45ish minute discussion on building your first sales development team. Whether you’re hiring your first SDR (make sure you hire two!), looking at building a remote SDR team in a cheaper market, or debating whether to outsource your list building… you’ve stumbled into the right conversation!

We’re making these AMAs available any way you like ’em – video, transcript (below), slideshare recap, and even a podcast (we’ll have them available on iTunes soon).  We’re doing these bi-weekly on Thursdays at noon PST, so make sure you >>>>Subscribe to the Calendar<<<<.

And join us live this Thursday 12/3 when we’re joined by David Cummings (Pardot/Atlanta Ventures) and Craig Rosenberg (Funnelholic/TOPO).

Brendon and Kyle will both be joining us onstage at the 2016 SaaStr Annual in February, where they’ll be sharing even more great insights into building and scaling sales teams, along with a ton of other sales tips. So as you’re reading, take a second to sign up for the SaaStr Annual. We’ll be bringing you 3 full days of incredible content and unparalleled networking with 5,000 of your SaaS BFFs. You definitely want to be there.   

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Full transcript

Gretchen: Hey, SaaStr fans. I’m Gretchen, COO here at SaaStr. I’m excited to welcome you to the second in the series of our new AMA webcast, called “Lunch With.” Every other week, we will invite the very best in the business to join us to answer all of your burning questions.

It’s super easy. You send your questions off into to the Twittersphere, join us live here on Google, we’ll answer everything that we can. If you happen to miss it, it will be always be available on YouTube right afterward. Make sure that you subscribe to the calendar.

We’ve got great guests today, and we’re going to kick things off talking about building an outbound sales team. It is an Ask Me Anything, so feel free to tweet your questions in, and we’ll do our best to get those answered today.

I’m very excited to introduce our guests today. Of course, we have SaaStr himself, Jason Lemkin. So happy you could make it today, Jason.

Jason Lemkin: Thanks, it was a tough stroll from the hallway into my office, but thanks for having me, Gretchen.

Gretchen: We appreciate the sacrifice. We’ve got two very special guests today.

The first is Brendon Cassidy. If you don’t already know Brendon by name, you definitely know him by reputation, because if you’ve read one-and-a-half articles on SaaStr, you’ve read about the amazing VP of Sales at EchoSign, who walked on water and doubled sales in 90 days while saving the world and all the puppies. I think that’s about how it went.

Before Brendon joined EchoSign, he was at LinkedIn, VP of their first sales team. He was employee 25, I think, something crazy like that. More recently, he was at Talkdesk. Right now, he’s kind of available, but not really, because he’s nearly impossible to get.

We also have Kyle Porter, CEO and co-founder of SalesLoft. SalesLoft’s also our sponsor today so a double thank you, Kyle, for joining us and for sponsoring.

Kyle Porter: You’re welcome.

Gretchen: Kyle started SalesLoft about four years ago. In the past year, they’ve grown from 5 to 80 employees, from $200K to about $8 million, and close to $10 million Series A earlier this year. Thanks for joining us, Kyle. I’m sure you have no more important things to work on right now.

Kyle: Honored to be here.

Gretchen: Let’s just kick things off. Kyle, can you tell us a little bit more about SalesLoft and how that loops in today? Then, we’ll just dive right in.

Kyle: One of the things we’ve noticed over the last few years is the rise of this top-of-the-funnel, sales-specialized role. You hear a number of different names, but the ones we hear most common are sales development.

What SalesLoft does is it’s the application of record for the sales development function. Everything the sales development team needs to do, everything an organization needs to do, top of the funnel, to convert prospects into qualified appointments. We help you connect, qualify and convert, and do that through a range of software that allows you to send emails, make phone calls, touch points, accountability, and a bunch of analytics to improve.

Jason: We might have lost you. Kyle and Brendon, can you hear me?

Kyle: I can hear you loud and clear.

Brendon Cassidy: I can hear you.

Jason: Gretchen’s done her role, so I’ll take over for a moment.

Gretchen: [laughs] Go ahead Jason, I’m good.

Jason: Before we get to the questions, Brendon, let me ask you something. One part of the bio that Gretchen left at the end is you’re now acting Head of Sales at HackerRank, great SaaS company with a great CEO. A lot’s changed in the last four or five years in SaaS, or for you eight years. From Spoke, to LinkedIn, to EchoSign, to Talkdesk, to HackerRank.

In the last 14 months, you’ve built two SDR teams from scratch. Talk about what your learnings are, because at EchoSign we barely got this off the ground, at least while I was there. You did a lot more after our acquisition. What’s new? What’s changed? Has the pendulum swung back? What should founders be thinking about? How have you approached these two teams you’ve built?

Brendon: I think it’s certainly changed a lot in the last three or four years… the concept of a sales development team, and outbound prospecting, and all that stuff.  Certainly, it’s been a big learning curve for me, because I think the sales stack is constantly changing. Whatever you thought the sales stack was four years ago, it’s probably completely different today.

SalesLoft and other companies have come on the scene and empowered outbound prospecting in sales development. One of my big learnings, it’s been a learning experience, the vision of sales development six or seven years ago was mostly a digital game. Email campaigns, etc., etc.

The re-emergence of the cold call as an integral part of the workflow is undeniable. That was a learning for me, which is to say it can’t just be an email or a digital loop of communication. You have to pick up the phone, and that has to be at least half of how you’re measuring activity for a sales development team.

There are a lot of benefits to it. It makes your sales development people have to be ready to discuss the product and the value of the product, and think like a salesperson, not just somebody sending emails on the sales development side. 

I think it helps them develop quicker and faster, and I think it has to be part of your core DNA. That’s a learning for me over the last couple of years. If you don’t believe in that, you have to learn it, I think, if you’re going to be in SDR or run an SDR team. That’s one of the bigger learnings for me.

Jason: Kyle, I want to let you read off the rest of the questions, but I want to ask each of you a question. Do you mind if I ask a question first? I’d love to hear the data you have second, Kyle, and first, Brendon, at EchoSign, really, apart from little experiments with Sam Blond and others, and Steven, we didn’t really have an outbound team until $10 million in revenue, for an SDR team.

Loretta, our VP of Marketing, had her own little team to qualify leads, but we did it way too late. We did great, but with hindsight — or challenge me on that. At Talkdesk, you come in and you’re doing it at one million something ARR, you’re putting in the team.

They’ve had a lot of success, and then you joined HackerRank, which is somewhere between 1 and 10 at the time you joined, and put in a team almost immediately. Assume you have any leads at all, because if you have no leads, you’d better pick up the phone. Brendon, if you have leads, when is too early?

Then second, Kyle, do you have any data from your customers to support this question?

Brendon: I think the question is, “When is it too early to hire an SDR or an SDR team?

Jason: Yeah, especially if you’ve never done sales before, or you don’t have a VP of Sales, and you have some leads coming in.

Brendon: It really can’t be too early. I think it should be, certainly if you have no leads, your first hire should really be an SDR and not an account executive, right?

Jason: Yep, that’s a classic learning right there.

Brendon: a learning from Shep at GuideSpark, which I would certainly put up there as one of the better outbound SDR teams in the last three or four years, but…

Jason: Let’s just reiterate that. If you have no leads, do not hire an AE. Hire an SDR.

Brendon: Yep. If you have no leads, don’t hire account executives. Hire SDRs. If you have no leads, don’t expect yourself to be growing 60 percent month over month out of the gate.

I think beyond that, at a macro level, as much as the outbound model is contributing to faster growth and all that stuff, I do think the marketing side has to be there too. I do think at some point, you’re going to hit some sort of fatigue if you’re 100 percent outbound, unless you have such high price points that support maybe a little bit slower sales cycle, and some other factors there.

I do believe as great as the outbound evolution has been, marketing plays a role, and there has to be a component on both sides.

Jason: Yep, and Kyle, then I’ll stop being rude and being the moderator, but SalesLoft has hundreds of customers, maybe a thousand. I don’t know. Hundreds. Maybe you don’t have the data handy, but do you have any learnings from the customer base? How early is too early? When should you get started? Any data you can layer on top of Brendon’s experiences?

Kyle: Yeah, we’ve got to look at what an SDR does, and I think we’ve talked a lot about SDRs from an outbound perspective, but SDRs play a role in inbound as well, because what you’re doing in the sales development function is three parts. You’re connecting, you’re qualifying, and you’re converting.

The input is data from somewhere, whether it’s from your marketing automation system, they came inbound, or it’s from some list you’ve built to go outbound. You’ve got to connect with those people, and then the output is a qualified opportunity. Even if you’ve got inbound leads – they may have downloaded a whitepaper – you’ve still got to call and email until you get them, and then you’ve still got to qualify them.

I think you have someone that can handle the full cycle when it’s really early, if you’ve got some leads coming in, and then like Brendon said, if you’ve got no leads coming in, you’ve got to get that marketing content going at the same time as you’ve got an outbound team really hammering email and phone to put opportunities in the pipeline.

I think companies have to do it. If you don’t have money, then you can’t do it, and the founders have to do it, but if you’ve got money, you hire people to do it, and that’s how you get your business launched.

I think it also helps even for companies who are pre-product market fit. You want to be calling those prospects and connecting with them, because you’ve got to get out of the office and figure out is this thing right for our market or our community? 

I think you always need people calling and emailing. What you call them might be different, and the CEO should be doing sales development functions at the very earliest stages if they don’t have any cash to hire somebody.

Brendon: Yeah, I think I’m going to weigh in here, Jason. On a blog I wrote but never posted, because I didn’t know how it would be received. I’ll launch the concept here, but it was basically saying if you don’t have any marketing-driven demand early, then you should hire a VP or head of sales development early. There’s five to ten people that I would consider absolutely elite sales development team builders and drivers.

I would, considering if you did have the money to spend, hiring those people much earlier rather than later, like a Jon Parisi to GuideSpark or other companies or Chris Pollot at Showpad, I consider to be elite. If marketing can’t drive any demand, then you hire that role almost in place of it on some level.

Jason: Let me ask you. Thinking through it, we’ve talked a lot about the VP of sales role as a Goldilocks one. If you wait too late, you leave huge amount of money on the table. If you make the hire too early, we know it’s a disaster.

Maybe if you’re lucky enough to hire this unicorn, the director of sales development or someone that can be a manager, maybe you can’t make that hire too early, assuming you have a few nickels in the bank.

Brendon:   If you can get somebody like that, but It’s not an easy hire to make.

Jason: No, it’s hard. Imagine you’re able to raise a couple million dollars seed round, and you have 18 customers. You’re not ready to hire a great VP of Sales. Maybe if you could find the unicorn, you might be able to hire a Director of Sales Development.

Brendon: I’ve advised companies that were trying to hire a VP of Sales, me, or whatever, and I said, “Hey, I would go talk to Jon Parisi or Chris Pollot. Go talk to them, you have no leads. Nobody’s interested in your product currently.”

Kyle: You have a lot people now that are really driving process and sales development. You mentioned Chris, Jon, Steven Brody at Mulesoft is a fantastic sales development director-level guy. I think you’ve got a lot of people that are really starting to get this thing and really starting to put in process.

It’s a little bit less of an art than sales is, because it is technology driven. There’s a little bit more volume, a little bit more steps to it. I think sales development is probably a little bit easier to find than that unicorn VP of sales. They also have a lot of room to grow and add a significant amount of value throughout the organization. I do like that idea as an early hire.

Jason: The three of us can chat about his forever, but let’s take a few of the questions that we’ve gotten. Kyle, can you see…

Brendon: I’m going to say one more point. I apologize, guys. I started my career as an SDR. As much as I’ve learned about it, and can do a lot of it, manage a lot of it, I really don’t want to.

When you talk about making that leader early, you do want sales focused on sales as much as possible. I really don’t want to manage that function in the company. Some VPs really do want to do that, but I don’t. We can move to the next one.

Jason: Let’s chitchat about that just for a second. Another thing that has risen in parallel to the rise of the SDR as a reinvigorated function is the rise of specialization. I think that the full stack AE is a dead concept unless you have no other choice.

Let’s just talk about an obvious point related to it. What are both of your learnings on that? Here’s where first time founders get stressed, “How do I budget for it?” Specialization, at first, seems more expensive.

“Why can’t I hire just two AE’s and give them an OTE? Why do I have to hire SDR’s, all this other help, someone to schedule meetings, and do all this stuff?” It seems more expensive, if you don’t raise quotas or something. What’s the learning of the rise of specialization here?

Kyle: Two AEs that are responsible for hunting everything, meaning setting up all their appointments, who’s to say that they’re going to be more productive than one who gets them all handed to them? I don’t even know if that math stacks up in the first place.

I think the big thing is that early stage. I think you’ve talked about this a lot. Watching your pack pre one in five million, that’s not the most important metric. Getting out and acquiring customers and getting repeatable customer acquisition strategy’s a lot more important than what you’re paying for those customers at that point in time.

You’ve got to have cash to pay for it, but I think from our perspective, we look at how many new appointments can an AE take on a given day? How many SDR’s do we need to produce those? We don’t want our AEs booking more than 15 percent of the appointments they take.

Those are the ones that come through referrals and relationships. They’re usually more upstream, more targeted. We want the rest of that time to be spent conducting those first-time interactions, those consultations, with the big opportunities that they can push through the finish line.

Jason: I want to hear from Brendon too. I know this is an impossible question. From our customer base, do you have a median or average ratio of SDRs to AEs? Can you track that through the Salesloft customers? What’s the magic answer to this endless riddle, Brendon, of SDR to AE ratio?

Brendon: If you have no leads, like one to one, no inbound leads.

Jason: That’s a good answer. If you have no leads, one to one.

Brendon: I would look at it like if it’s a 50/50 type scenario. Inbound to outbound, maybe two to one, two AEs for every SDR, that kind of scenario. That’s how I would weigh it out. I think getting back to why don’t you want account executives being responsible to drive their own pipeline?

It’s like death of the Rolodex and the traditional enterprise selling mentality. Reps would come in and say, “Oh, I have a Rolodex, this black book of all these people that are just waiting for me to call to set up meetings, to buy whatever I’m selling next.”

What I’ve learned is that’s totally un-scalable. It’s somebody coming in saying, “I have a Rolodex and that’s my end to end. I drive my own deal flow and close my own deals.” Unless you have a Viva type deal ASP, then you’ll burn through that Rolodex really quick, and it probably won’t result in that much revenue.

Your AE’s are going to have to put in the hard yards around prospecting and all the same thing the SDR’s are doing, and they don’t want to do it, period. Quite frankly, most of them aren’t great at doing it, and that’s OK. You’d rather that they were great at closing than great at creating their own deal flow. 

Jason: My rule, I curiously thought. I think if someone has a Rolodex, if you’re lucky you get three. You get three customers from the Rolodex. If you get three and they’re six figure deals, you’re happy to have them. I think the Rolodex gets you between one and three customers per sales person.

Kyle: It’s what brought the Rolodex about. If you can continue the enlargement of the Rolodex, I think that’s a difference builder. I want to say something about the metrics. I think that you got to start with the leads and say, “OK, you’ve got inbound leads, how many inbound SDR’s do you need per lead?”

It might be something like you need one per 400 leads. Let’s say that produces one qualified appointment per rep, per day. Your reps can handle three new qualified appointments per day in addition to their follow-up appointments. They’re going to have three or four other follow ups in order to touch two’s and three’s.

You got to fill in that gap with your outbound team. I think that’s the only real way to do it, is do is from a capacity perspective. You want your AEs running at full speed all the time. When we first got in the business, we saw two AEs to one, then three AEs to two, and now we’re seeing a one to one.

We’re definitely seeing the transition more toward the SDR. In fact, here we have three SDRs per every two AEs. That includes the inbound SDRs as well. You got to look at the math from a lead perspective. I think you got to do it from a capacity of the AE mentality.

I got one that I saw on here. It’s one of the questions that came in through Twitter. It says, “How much longer are sale cycles from outbound versus inbound?” It’s the first question on the list. “How do we think about those?”

I saw this question and immediately popped into my head this pie chart that a friend named Steve Richard, many of you guys may know Steve, he’s a great inside sales consultant. He shows a pie chart, and he says, “10 percent of the cold calls that you connect, you’re going to get someone that just happens to say, ‘Hey, you know, I’ve been in this market. I’m interested in this space.'”

Great call, and you’re going to start. That’s kind of like an inbound lead.” 40 percent, you’ll get will say, ‘Absolutely, not,’ or 45 percent. The other 45 percent are convincible to take an appointment.”

I look at that person who said, “I’m interested in this thing,” as similar to an inbound lead. The challenge with the inbound leads is they’ve already started the sale cycle. You may be a shorter sales cycle, but that’s if you win the deal.

You may have three or four other competitors in there, because they’ve already gone down that path. The thing I like about outbound is that you have the opportunity to catch someone pre-sales cycle, before they’ve started to use the competitor’s terminology. Before they’ve started to write an RFP, you have the opportunity to shape that.

Outbound is a little bit of a larger sale cycle, historically and traditionally. You have an opportunity to win a lot of those and get influential on a lot of those. You have an ability to pick the right logo, when you go outbound, maybe driving higher ACV’s. That’s some thoughts on that question, that I saw at the top of the list.

Jason: Brendon, let me ask a follow on that. We can talk more about the second point that Kyle brought up, which is at least outbound lets you target the buyer that you want in the organization.

Let’s step back to the question, because a lot of first time founders, very driven ones, and Brendon, you’ve worked with a bunch in your career. We all want monthly quotas. We want to grow month over month in numbers.

I think outbound almost inherently has to take at least a day longer than inbound, even the best case. How do you coach founders or manage their expectations on this? How much longer are the sales cycles, and what’s your advice in terms of making that investment to CEOs?

Brendon: There’s a lot of factors that influence that. One is how big is your brand or mini brand? All those things that help you get more credibility earlier on in the sales cycle. How established is the space in the category?

The reality is it’s going to take longer. The sales cycles will be longer. I’ve never seen a scenario where it took shorter or even equivalent. I think a lot of people would like to make that claim. They’re full of it most of the time. That’s my two cents.

Kyle: That’s not always so bad. A longer sales cycle is not always so bad, as long as it moves the pipeline up.

Brendon: No, I think it’s OK. There’s two things, it’s going to take longer, and it’s going to take some time to get your SDR work, like fully built, baked, flushed out, messaging nailed, and all that type of stuff. All those things are going to take time.

Those are the things that first time founders, it’s on the executives, around them, not just sales, but marketing and all, but really on sales. These are going to be longer sales cycles. It’s going to take longer. This isn’t going to bear the fruit to be a hyper growth startup in 90 days. I think those are all…

Jason: How long does it take to see the first fruits of it from the budget, three to four months?

Brendon: The first fruits are quick. The first fruits you should see in 60 days, 90 days. Seeing the first fruits versus seeing the bounty, are two completely different things. If you talk to Jon Parisi or all these great sales development leaders, they’ll tell you it takes 9-12 months to get their SDR organization running the way they want to run it.

Jason: If you’re looking for seeds, for green chutes and sprouts…

Brendon: You should see fruits early. You should see some quick wins and say, “Hey, we think we can scale this thing and build it.” I know it’s not what most founders want to hear about. How long is this really going to be something that we can really put our hat on? Something’s that going to consistently deliver repeatable revenue, growth, and all that stuff. It’s going to take some time.

Kyle: There’s an intangible benefit of the outbound that they need to be educated on as well. The outbound is going to help build your brand. It’s going to be helping build your mini brand. You can distribute your content through outbound.

You can get people to sign up and join your community through outbound. Outbound grows your inbound channels as well. Now more people know about you, are sharing your stuff, coming to your blog, signing up for your webinars and white papers.

It really drives the whole thing. There’s a guy named Alan Nance in Atlanta. He joked around, he said, “Outbound, inbound, I’m doing all the things. I’m all bounding and each one grows each other.” I thought that was a great analogy.

Brendon: Did you patent that term, all bounding?

Kyle: No, it actually came out in a conference that we ran down here in Atlanta. Someone in the audience bought the domain name on the spot and turned his consulting company into allbound.com. That was kind of funny.

There’s another analogy. There’s a guy named Dan McDade. He’s a sales author, and he’s got this wild philosophy. He says that, “Long term leads are better than short term leads.” You look at it and you’re like, “Hold on, that doesn’t make any sense.”

Then you think about this strategy, back when interest rates were good. There was a strategy, you take your money and you stack CDs. You get a one-year CD, three-year CD, two-year CD, six-month CD and what happens is over time you got money coming in all the time, but it’s only once they start to mature.

I think that’s what happens with these long-term leads is you get that engine up and going, make it predictable, repeatable, in nine months from today, like you said, “You got a lot of fruit coming in.” It’s not just a couple tangerines on the tree.

Brendon: When you talked about an inbound lead may come in, but they may be already into an evaluation. I think those opportunities you reach out to, that maybe don’t go into a sales cycle right now, when they are ready or the market’s mature enough, they’re going to come back and start with you. I think that’s another… 

Kyle: They start going to your competitors and using your lingo, your language. 

Brendon: Again, there’s no immediate fruit there, but that’s the long term impact of it and all those other things.

Kyle: What next, SaaStr?

Jason: This one’s an interesting one. It’s just a broad question, but it’s good to chat. From the Twitter, how do you ramp new college grads as quickly as possible for an ADR, SDR role? One of things you’re often hoping to get out of this role, if you have an engine, is to hire a relatively green folks. How do you do this?

Kyle: For us, it starts in the hiring process. You want to really be diligent about the person you select on the front end in the first place. We’ve gone through some SDR training, coaching on how to educate our team and get them up to speed.

One of the biggest things is getting them on the phone in the interview process. Do mock calls, really dive in to, “Are they going to be able to accomplish this?” Mark Roberge, the head of sales at Hubspot had a great piece of advice that we started using.

He said, “In the interview, we ask our sales team members to give a pitch, and then after the pitch I give them feedback on one or two areas that they could improve on. Then I ask them to do it again, and I see did they take the coaching? Did they implement it? Did they change?”

We’ve used that and had a lot of success with it. Outside of that, we’ve got a playbook. I’m sure Brendon’s done some amazing things to ramp the team up. It’s a routine of things that we’ve learned have been successful. We repeat it, and we improve. It’s certainly something you need to be intentional, and it’s critical.

Jason: Any insights, Brendon? You probably don’t want to hire a senior AE fresh out of school, but we got to make this work for SDRs. You disagree with the premise or any thoughts on how you can build that newbie engine?

Brendon: You’re hiring talent, not resume. You’re looking for personality and raw skills, not 10 years selling for Salesforce, Oracle or whoever else. That’s a given. You need to identify what is the culture of your company, what type of skill sets or personalities have succeeded.

It doesn’t mean that you’re going to hire a clone of everybody’s that been successful before. I think there’s some common things you need to look for like are they curious about technology? That’s actually a learning from Jason Lemkin from long ago.

He really likes salespeople that were curious like, “Here’s this cool new app,” and they wanted to learn more. They could figure out how to integrate EchoSign and Salesforce, and all that. People that were curious about technology rather than salespeople that were uninterested in technology, which is a lot of salespeople.

I think those kind of things like, are they competitive? For me, I like that, because you don’t want unhealthy competition. When you bring somebody in, and they don’t know anything yet, you have a team and a group around them that do know something, that can be a pretty terrifying thing.

Your ability to adapt to that environment and more how to compete. In the beginning, you’re just competing against yourself, learn, and pull yourself up. You’re going to lose them in the first 90 days, I think, if you don’t get them up and running, understanding, and knowledgeable of the company, product, mission, and the pitch.

If you don’t have them moving in the right direction in the first 90 days, it’s not going to happen, in my opinion. Those type of characteristics, the understanding, teamwork… I look for those kind of things.

Jason: Let’s follow up on that.  After you make the hire, I think we chat a lot about this, how long do you give someone? I wrote this thing on VP of Sales a long time ago, you’ll remember, that was controversial, which is, “You’ll know in half the sales cycle.”

Every VP of Sales hated it, but then they thought about it and they agreed. With an AE, you know in a sales cycle. Even if they don’t hit quota, you kind of know in a sales cycle. We can talk about what the KPR goal should be. If, for an SDR, it’s appointment setting, how quickly will you know? How should you think about churn in SDRs versus AEs?

Brendon: Kyle?

Kyle: When I first started thinking about sales development early on, we thought the biggest metric was number of qualified appointments completed by the AEs. What we realized, though, is that there was a numerator we weren’t thinking about which is the number of prospects that were prospected or the number of contacts that were prospected.

If I go in an SDR room and I prospect 20,000 people but only turn over 20 appointments, then someone else turns over 20 appointments on 500 people, then that second person is way more effective. They’ve taken a smaller subset of prospects and turned them into the same amount of appointments. We look at the efficiency score of our sales development reps, how efficient are they with their time, with their resources.

Because if every SDR needed 20,000 prospects in order to set 20 appointments, then we’re going to be spending a lot of time gathering data, and really going through this scorched earth of our prospect universe. That’s a big one that we pay a lot of attention to.

Another one is looking at the connect to conversion ratio. They’re getting on the phone with these prospects. How many of those are they actually turning into qualified appointments? I think that’s a critical one to pay attention to as well, and then coaching around those things.

Someone who makes a ton of dials and connects a lot, but doesn’t convert into a lot of opportunities needs different coaching than someone who doesn’t make a lot of dials but gets good conversion post dial. I think you got to look at those different metrics for each individual sales development rep, and have them in quick to analyze charts and have coaching ready to come in on them afterwards.

Jason: That’s interesting. I’d love to get your thoughts on the point Kyle made, Brendon, because that’s a new thing I’m thinking about now. When I think about SDRs and I’m not as deeply as experienced as you. The first metric I look at is connect rate. Because I figure if no one’s ever heard of your product in the entire world, and you get someone on the phone, that’s something.

But maybe that top of the funnel metric is not as valuable.  If someone’s an amazing phone virtuoso as whether that leads to an appointment.  Do you have a sense of which of those two… is there an ideal metric, and can there really be two flavors of SDRs like there can be multiple flavors of AEs here?

Brendon: Are you talking about measuring people on appointments set versus…

Jason: I realize I’ve been discriminating. Clearly with AEs there’s many different approaches. There’s, “Dial everybody and abandon any deal that doesn’t come through in a second.” There’s, “Take all my leads and pick the five best.” There’s conversational, there’s transactional. There’s different ways to scale the mountain as AEs.

Maybe I haven’t been fair enough to SDRs because I’m hyper-focused on just penetrating. Kyle’s point is, in some cases you might be worse at connecting but better at setting up an appointment.

That ratio can change versus if you can get a hundred people on a phone a month, but none of them convert to an appointment, that’s a slightly new one to me to think through, and maybe it’s not the way you think about it either, but it’s an interesting discussion…

Brendon: We have a fantastic sales development manager. Her name’s Jess Oni and we’re probably going to move more towards a point system next quarter, but today it’s based off the number of meetings they set.

Jason: Let’s chat through that. Today the KPI is meetings, so what do you try and get out of the SDR?

Brendon: There’s KPIs, there’s sort of call metric KPIs, but ultimately their variable comp is mostly sat on the number of meetings. I know a lot of people that are moving to a points system.

A lot of people that have a variable broken up based on a number of meetings and some sort of threshold of pipeline created and all sorts of things. For us, because we’re building a new SDR team, for us it’s even better to keep it simple, initially and learning to creating sub-criteria and categories.

Kyle: I think the ultimate metric for compensation is contribution to pipeline, but there’s a challenge there, and it goes back to that idea that I mentioned with regards to efficiency. If I’ve got somebody who’s taking 20,000 prospects and turning them into only 20 leads, that’s not sustainable.

Now for them in week one, week two, and their manager, that’s a great metric but as the CEO of the company, I’m looking at that and saying like, “We can’t repeat that, we can’t scale that, we can’t do that for a long period of time.”

I think the ultimate compensation metric for an SDR is that contribution to quota. I passed over this opportunity, it’s this potential deal size, we know what percentage closes over time. I think that’s the greatest, if you can hammer it all out.

I think early on, just like Brendon’s doing, we still are paying on completed appointments, but the more sophisticated SDR teams are paying on that contribution to pipeline.

Brendon: That’s the critical part, is you have to be open-minded and willing to learn and adjust as you move forward as you get more data.

That’s a critical component I think to be successful in the outbound prospecting era we’re in, which is the Sales Stack is constantly changing processes and techniques are changing so much faster than they ever did before, and you have to look at the data and decide what’s the right way to do it.

Kyle: We’ve seen a very unique transformation in sales development since we started. When we started, we were selling to companies that were just like us. Really small and trying to grow very fast. What we found was that the most effective strategy was just find as many VPXs as you possibly can, and get in as many appointments as you possibly can with those people.

It was kind of like we had a green field, our customers had a green field, and it was just grab as much as you possibly can. Over time what we’ve noticed is that the most effective scaling sales development organizations aren’t going after the people first, they’re going after the companies first. They’re identifying not just the ideal profile for the person, but the ideal profile for the organization.

It’s kind of this account-based strategy and the term we’ve heard emerge is this account-based sales development. Whether it sticks or not is up in the air, but it means now, OK, we’ve gone through green field, we’ve penetrated a bigger market, we’ve understood our customer better, we want to tilt a smidge upstream, a la SaaStr.

Let’s now identify the right accounts for us and figure out the couple people in those organizations, let’s prospect the account versus the person. I think this is the big trend that we’re seeing now, is this account-based strategy for sales development. Have you guys heard of that or seen that happening?

Jason: Yeah. It’s account-based marketing, account-based sales. It’s all the same thing, which is the next level of sophistication – processes and people around what winners have been trying to do that that sell these huge deals for a long time.

Kyle: But now we have so much good data on companies. You’ve got companies like Mattermark and CrunchBase, so you can really identify who’s the sweet spot for you and let’s go get that company, because the head of VP of X at that company might not be there next week, but the company still will be so let’s get them.

Jason: This is true.  Because we have about six minutes, I do want to get one thing that may seem simplistic, but just because there’s so many first time founders, I meet do this, so let’s go back in time. Can you outsource SDRs in the beginning, and if so, how do you think about how long you do it?

I know you might laugh, but now that folks are thinking about outbound more, new founders, they’re actually trying to outsource more earlier and do this experiment more. Obviously in-house is better, but what are the Zen learnings here?

Brendon: You mean outsourced to like Spokane, or outsourced to Guam?

Jason: Let’s talk about geo second, the first is third parties. Bucket shops. They’ll give you either dedicated or pooled people that will call your list, you give them the list, and they will call them until you can find those people, and they will set up appointments.

I used to laugh at this stuff back in the day, but I have met with many founders now that at least have a tiny bit of effectiveness doing this if they provide the list. Any thoughts? Kyle, you may have more experience with this than Brendon, but since more people are trying to outsource this in the beginning, any insights to founders?

Kyle: Yeah, I think it’s kind of the reverse. I’ve seen outsourced shops do a really good job of building the lists.

Jason: For sure. 

Kyle: Yeah, like going through LinkedIn or however you’re going to build up first name, last name, company, and title. We’ve had companies that were using Salesloft prospector and that decided to go hook up with an offshore team and do a bunch of stuff with them, and even it’s been competitive to our product from time to time.

I’ve seen that a lot and I’ve actually seen more success with the outsourced SDR as a service with the later stage companies like private equity back companies where they’ve carved off a division and they’ve got a repeatable sales cycle. They know their product, they know their customer, and they’ve gone to one of these professional firms like a PointClear, or a Vorsight or a Televerde.

I think that those companies have been more successful with the mid to later stage than they have been with the early stage startups. You want to be on those calls, because the things you’re hearing back from those prospects, that’s like product feedback, sentiment, it’s all these things that matter to the heart and soul of an organization.

It’s just so hard to outsource that stuff, because you talk about the passion behind the early hires, like the evangelical hires. That’s the kind of person you want on the phone in your organization and you’re not going to get that in Guam or wherever.

Jason: Yeah, of course, and so…

Brendon: Can I give my insight here, Jason?

Jason: Yeah, please.

Brendon: My insight would be it’s their list building services if you’re expecting them to scalable-y create meetings and appointments… no.  No offense to anyone that’s running any of these companies, but it’s just not going to fill the gap.

You see a lot of first time founders see it and get enthralled with it temporarily and then they’ll learn pretty quickly that it’s just not going to… It’s a phenomenal list building service, and I know a ton of not just SDRs but salespeople that use it too. But it’s not your best foot forward when you’re Talkdesk at 20 employees or HackerRank at 50 employees or SalesLoft at 30. It’s not just not marketing.

Kyle: It’s like starting a business and saying, “We’re not going to do content marketing ever. We’re not going to do events and lead. We’re not going to generate our own leads. We’re just going to pay Google all day long for them.”

Brendon: It completely, if you take prospecting seriously, that completely marginalizes them if you say, “Hey, we can outsource it to the cheapest market we can get it in,” then you don’t believe in it anyways, right?

Jason: I hear you. What I’ve seen recently with founders I meet with, it’s not so much to save money. It’s, “I’m 23, I just started this SaaS company. I have a little bit of something. I have no resources. I actually have a few nickels, because I just came out of YC or whatever, and I want to get it going tomorrow, and I’ve never done this before.

I don’t even know what I’m doing, so I’m going to outsource it, and then I will take it in-house as soon as I can find some people and I actually know what I’m doing.” I see that as a new trend in my little micro ecosystem. Brendon, I know I’m going to lose you in a minute, but let me just ask one related question on that to you, because you have experience, and Kyle, chime in.

We all hate the idea of not having our sales team together geographically, but you’ve worked in multiple situations where you’ve had remote SDR teams. What are your learnings there and how does that contrast to remote AEs? Any insights there?

Brendon: I think if you have somebody that you trust in a remote market, that’s critical. Don’t reach for, like try to build a team in a cheaper labor market where you don’t have somebody to build that team that you know and trust.

At Talkdesk, we had Louis Petrossi and he did a fantastic job of that and was somebody that we knew and I knew and trusted, and built a phenomenal team in that scenario, but don’t reach for it if you don’t have the person there. Certainly, Atlanta’s different. Atlanta’s obviously not as expensive a labor market as here. It’s expensive to scale an SDR team in the Bay Area.

Kyle: I pay $22 a square foot for real estate on the corner of Piedmont and Lenox in the heart of Buckhead, Atlanta, so I don’t have to worry about the space much. There’s a lot of great sales talent in this city, so I can’t comment too well on the topic, unfortunately.

Jason: Kyle, I need to wrap up, but let me just ask you if you have any data from the SalesLoft community. Do you have a rough sense of what percent of the customers might have SDR teams that aren’t remote, that aren’t connected down the hall from there, or six feet away from the AEs? 

Kyle: I don’t have any data right off the top of my head. I’ve heard a good bit of it. I think kind of series B, SaaS, Zenefits has a great off-site in Arizona. I know that Gainsight has one, I think it’s in Ohio or St. Louis. It’s in St. Louis.

I’ve seen some great ones, between that series A and series B when you really get that, what’s it called when you’re past 10 million?  The escape velocity?  Kind of that escape velocity stage.

Jason: Yep. You’re at initial scale.

Kyle: Yeah, I think that’s a good time to do it.

Jason: All right guys. I think we got through about 11 percent of all the fun things we could’ve touched on, but this was amazing. I know we’re out of time. Thanks, Brendon, for joining. Thanks, Kyle for hosting and doing this. A couple things coming up, just real quick.

Together with Max and Sales Hacker, Kyle and I will both be speaking at Sales Stack here in San Francisco on November 10th, so come see us. It’ll be all day, it’ll be super fun. On November 19th, we have the SaaStr Founder Soiree. We’ve got room for 600.

There’s a small amount of tickets, but either you can buy one on SaaStr.com or if you buy a ticket to the SaaStr Annual in ’16 in February, you’ll get a free ticket and you’ll get into the event. It’ll be all SaaS founders and CEOs on November 19th here in San Francisco. Thank you guys, again. This was great. This will be up on YouTube, and I think people will use this as a reference material for a long time. Thanks, guys. Thank you, Gretchen.

Kyle: See you. Bye Brendon, bye Jason. Thanks Gretchen. Bye.