Stop LARPing and Actually Run the Numbers
There have been a lot of posts on LinkedIn decrying the death of the SDR org.
While these absolute statements are mostly intended to create engagement, it’s important to remember that “the dose makes the poison.” In this case, the “dose” is usually a 3:1 or 2:1 AE:SDR ratio, combined with plummeting close rates since “SaaS-mageddon,” and a marketing org that doesn’t actually generate demand in the marketplace of ideas, but just runs a paid acquisition strategy.
So, how did we get here and what should the future of SDR teams look like?
First, we need to acknowledge just how much things can change in one decade, or three. The very first banner ad was run on HotWired.com in 1994 for AT&T and had a 44% click-through rate! For reference, the typical CTR today is 0.1%—that’s a 440x degradation in performance.
Most of the SDR processes, conversion metrics, and org structures that we take for granted today, were mostly solidified by 2012. In the decade that followed, changes in buyer behavior, the tech landscape, hybrid work, and the economy have resulted in a drop off of SDR performance nearly as severe as that of banner ads from 30 years ago.
In the heady days of zero-interest-rate induced tech growth, it was typical for SDR organizations to generate opportunities that closed at rates between 20-30%. This brute force approach to creating new business might have been expensive, but at least it penciled out. Now, close rates from SDR sourced opportunities are closer to 7-9% and suddenly SDR organizations are costing the business significantly more money than they’re helping to source.
The predictable result is that CFOs and operations leaders are slashing their entire SDR organizations in an effort to try and extend their startups’ runway.
So does that mean that we should fully deprecate the SDR role, at least in this current higher interest rate environment?
No—companies need to use a scalpel, not a cleaver when it comes to right-sizing these teams. In many sales organizations, account executives aren’t generating enough of their own pipeline to meet plan and cutting the entire SDR team can kick off a kind of doom loop for businesses.
It’s far too common for CFOs, CROs, and ops leaders to skip doing any analysis of when their SDR orgs hit an “S-Curve” in productivity. Instead, they either do something hand-wavy that they call analysis or skip it altogether and just dictate that all SDRs should support 2-4 sellers and call it good. The right approach is to break free of the coverage ratio discourse and do an analysis of the SDR business that’s actually fit for purpose.
To misquote Thomas Edison, “There is no expedient to which a man will not go to avoid the real labor of [ACTUALLY CRUNCHING THE FREAKING NUMBERS].” Tech companies need to apply the same level of analytical rigor and data science that they do on the product side of the house to their demand generation and SDR programs.
Companies that actually do so, are starting to arrive at the following conclusions:
In conclusion, it’s critical that businesses stop play-acting when it comes to analyzing the contributions and quality of their SDR programs and make actual data-driven decisions. SDRs can still generate tremendous value for their businesses, but cookie-cutter org plans and productivity assumptions are almost guaranteed to fail in this current environment.
LARPing = click bait