The Broken Promise of the $100 Billion SDR Industry: Flip The Script with Founder-Led Sales

This article is an excerpt from my upcoming book Flip the Script: The Founder's Guide to Cold Outreach. A first in a series of playbooks laser-focused on giving early-stage B2B founders and agency owners the tools they need to get more clients.

Early-stage B2B founder or agency owner? Claim an exclusive complimentary advance draft copy of the book here (Limited release.)

There’s an estimated¹ 650,000+ full-time Sales Development Representatives in the United States (hereinafter ‘SDRs’ and ‘BDRs’ interchangeably). It’s probably fair to say that there’s over a million people that do the job, full-time, across the globe. A $50+ billion industry the U.S, or $100+ billion globally.

A sales development representative is someone who focuses on prospecting, moving and qualifying leads through the sales pipeline and deliver those leads to the right salesperson. Their job is, essentially, to book meetings with qualified companies. Typically, on behalf of a founder, sales, or account executive.

The True Cost of Hiring a Sales Development Representative (SDR)

The goal of the SDR function –generally assumed– is to book meetings with qualified companies. 

This is accomplished through a range of activities such as email, phone, and social media (on platforms like LinkedIn). Most SDRs are measured by the number of opportunities they create, how many meetings they book, and how many meetings that are completed.  As such, it’s often the very first touchpoint with your future ideal customers.  The Sales Dev Rep is essentially your Director of First Impressions.

💡All benchmarks and insights that I’ll discuss in this article are based on over 300 pages of public reports, benchmarks and insights from companies such as Salesloft, MarketStar, Inside Sales, Pavilion, Foundry, Revenue Collective, EBQ and Outreach.io and others (I’ll provide footnotes to each individual report when applicable, see end for full list.)

It’s an entry-level job, not unlike the responsibilities of a telemarketer, and 8 out of 10 companies that hire for SDRs does not require a college degree² or any real experience in sales.

The entry-level job pays well, too. $71,500 per year on average³.  Like other job functions within a sales organization the compensation is split between base salary and commission (70% base, 30% commission, on average).  To put the number in perspective, the average salary in the United States was, for the same reported period⁴, approximately $65,000.Not bad of an entry level job that you can do from home, without a college degree or much work experience.

Add taxes, health benefits, software/tools (prospecting, sales intelligence software, and so on) , and other costs and you’re looking at an additional +36% in costs as an employer. As you go about scaling your SDR team you’ll eventually need a manager to run the team. The most frequent ratio is 1:5, which adds an additional $26,405 in total overhead, on average.

The 'Other' cost category is a very conservative estimate and includes various expenses associated with hiring and supporting a Sales Development Representative (SDR) working remotely from home. It encompasses recruitment, onboarding and training, equipment purchase (such as a computer, monitors, keyboard, and mouse), phone and communication expenses, office supplies, workspace setup costs, and miscellaneous benefits like wellness programs. These figures are rough estimates and can vary widely based on specific company policies, industry standards, and location. A reasonable estimate here is between (First-Year): $3,800 - $15,400.

The fully loaded cost adds up to around $119,000 per year, or $9,900 a month on average. That’s arguably a lot of money… 

But this is sales...

And sales drive revenue. You’re hiring someone to go get you clients, and as we’ve discussed… it doesn’t take much to scale a b2b business. Besides… what else are you going to do? Facebook ads are too expensive, SEO takes forever, referrals are unpredictable, content marketing is saturated, and so on.

90% of SDRs report to the sales function within an organization, yet... the average SDR holds little or no sales experience.

Research across industry reports from leading tech companies and research firms within the industry suggests that the average SDR has less than 6 months of experience in sales development⁵. 

That being said, a share (perhaps even a majority depending on industry and sales cycle) of SDRs and BDRs have arguably not even been in their role long enough to witness a new lead move through the entire sales process and become a new customer (which, in some instances, can take as long as 6-12 months).

Here's what I’m getting at:

You're hiring a moderately expensive, yet undeniably inexperienced person, to do a very important job!

It’s a job with rapid onboarding (a couple of weeks) and high turnover (most stay in their role for less than a year), and 50% never reach their quotas. Again, not unlike telemarketing or other entry-level sales positions. On that note– let’s talk expectations and goals. 

A Day In The Life, Activity and Goals

Sales Dev Reps spend their day in a variety of tools such as CRMs, Chat, Sales Engagement Platforms and Sequence Builders, Analytics, LinkedIn and email outreach, and so on.  A combination of manual work and automation. They use between 3-5 tools to support them in their day to day work at an average cost of $285 per month.

The average SDR makes 40 phone calls and send 36 emails⁶ per day. The average reply rate will vary by industry, but can generally be assumed as follows: 

• 100 emails sent

• 3.2% reply rate 

• 1.6% positive reply 

• 1.1% schedule meeting 

• 0.8% attendance rate

Each publication reports slightly different on reply rates, ranging from 1%-6%, but the average is roughly 3%.  Salesloft, for instance, suggests⁷ that a good benchmark for replied % is 5-7%, yet their own study shows⁸ that the average % of emails replied for BDR and SDRs is 2.8%.

Here’s a similar breakdown of average cold call performance:

• 100 phone calls

• 7.5% connect rate 

• 0.7% meeting set rate 

• 0.5% attendance rate 

The bottom line? It takes 128 cold emails or 200 phone calls for a single meeting. That’s a lot of activity. Why is that? A couple of reasons… 

Reason #1: There are 600,000+ other individuals competing for the same customers, with the same average daily activity. You do the math. It adds up to, uhm, a lot of noise.

Reason #2:  Most of your prospective clients are not interested in buying from you, right now. "The Buyers Pyramid" by Chet Holmes (From The Ultimate Sales Machine) suggests that only 3% are buying, and 6-7% are open to it at any given moment in time.  There’s a whole bunch of individuals that simply aren’t open to, or interested in, what you have to offer right now.

Reason #3: I was fortunate enough (if you could call it that) to have several telemarketing jobs early on in my career, selling various products and services to both consumers and business owners.

Here’s what I learned: It’s not an easy job. Especially when you’re early on in your career.

Cold calling is not for the faint-hearted or inexperienced, and getting someone to pick up the phone and listen to what you have to say these days is damn near impossible– and exponentially more challenging if you’re young or inexperienced and tasked with initiating meaningful conversations with key decision-makers. 

 Reason #4: 95% of cold outreach emails are not personalized⁸.  Enough said.

 Reason #5: Status imbalance. SDRs are often in a (if not the most) junior position within a company, yet tasked with initiating conversations with executives, key decision-makers, or founders. It's like sending a freshman to teach a masterclass. No matter how bright that student might be, the audience—filled with experts—is going to be skeptical right from the start. Unfair.

In summary… the odds aren’t exactly stacked in the favor of a young inexperienced sales development representative. And so… sales outreach becomes “a number’s game” (or raise to the bottom) to make up for the poor performance.

I get it – “You miss 100% of the shots you don't take”, “you have to kiss a lot of frogs…” and all of that. 

But there’s not enough quantity to make up for the lack of quality.  

The average SDR works 225 days per year (assuming full-time job with minimum vacation) and sends 36 emails and makes 40 phone calls a day. That’s 675 emails and 750 phone calls in a month… resulting in 9 actual meetings.

It's a very expensive way to acquire a new lead

With a fully loaded cost of $9,900 per month, the average company, with the average SDR, is paying $1,075 for an initial conversation with a new potential client.

Naturally, I don’t know the unit economics of your business or what you can afford to pay for a new customer, but the target cost per meeting across the industry reports that I have dissected (see footnotes) suggests that most companies have a cost per meeting target in the $250-$550.

Those meetings are of varying quality, too. Usually an initial 30-minute discovery call or product demonstration with someone who may or may not be in the market to buy your products or services at this moment in time. To hit their quota and lower the cost per meeting to the desired range, the average SDR would have to book between 18 to 39 meetings per month.The math doesn’t work. 

One could perhaps explore if technology could assist these workers and increase their efficiency to a point where there's a reasonable business case...

But, consider this: the average Sales Development Representative is already juggling between 3-5 tools designed to optimize their performance. Whether it's Salesloft, touting its ability to 'unlock efficiency and superior results,' or Apollo, promising access to 'over 265 million contacts powered by AI,' there's no shortage of platforms aiming to be the game-changer.

Don't get me wrong. These companies have built great services, but even the self-published reports from the very same industry leaders paint a sobering picture and make a grim case for their actual ability to unlock real value for their users.

A small portion of the companies that rely on a SDR workforce to drive sales and revenue can certainly get away with it because they have a large base of high-value enterprise clients, or tons of funding– but it’s not a path I would recommend for a founder or small business owner who’s looking to scale their sales.

It’s not their (The Sales Dev Reps) fault, either. Companies that are building SDR teams are hiring team members with no experience, little training, crazy expectations, repetitive work, tons of rejection and expect a near miracle.  If I was in that position, I’d probably quit my job within the year, too.

All this being said– you can stack the odds to be in your favor if you take the road less traveled.

 It's not a stretch to say that the system, as it stands, is fundamentally flawed.

Companies are shelling out significant amounts of money to put undertrained and inexperienced individuals in high-stakes roles, setting them up for burnout and failure. This is not just inefficient; it's irresponsible. The metrics are grim, the expectations sky-high, and the support often inadequate. It's like sending someone into the ring blindfolded and then wondering why they can't land a punch.

And let's not forget about the prospective clients on the receiving end. They're drowned by impersonal, often irrelevant outreach, further eroding the effectiveness of the SDR function and making it an uphill battle for everyone involved.

But it doesn't have to be this way.

Consider the opposite: Founders carry stories, passion, and a deep understanding of the problem they're solving. This authenticity can cut through the noise, allowing for targeted outreach that resonates deeply with potential clients. Your unique narrative as a founder can serve as a powerful tool for personalized communication, immediately setting you apart in a sea of templated messages.

 Moreover, the status imbalance often seen in SDR-led outreach is negated when a founder steps in. When a founder connects with a decision-maker, there's an immediate level of respect and gravitas that accelerates the building of trust.

This replaces the 'spray and pray' tactics with a more strategic approach, turning what was once an uphill battle into a conversation between equals, ripe with potential for meaningful business relationships.

Plus, founders and business owners have an innate ability to engage even those who might not currently be in the market for a new solution. While conventional wisdom suggests that only a small percentage of prospects are ready to buy at any given moment, a compelling story from someone who has lived the problem can awaken latent interest.

By leveraging the unique advantages of founder-led sales—credibility, experience, and a deeply ingrained understanding of the product or service—you can flip the script. You can engage in outreach that's not just a numbers game but a strategy, targeted and efficient, that respects the intelligence and needs of your potential clients.

In the chapters that follow, I'll peel back the layers on this flawed system and arm you with the proven strategies and best practices you need to take the road less traveled.

You'll learn founder-led outreach methods that lead with credibility and value, letting you connect with the 90% of potential buyers who are long-term prospects, without burning bridges.

💡This article is an excerpt from my upcoming book Flip the Script: The Founder's Guide to Cold Outreach. A first in a series of playbooks laser-focused on giving early-stage B2B founders and agency owners the tools they need to get more clients.

Early-stage B2B founder or agency owner? Claim an exclusive complimentary advance draft copy of the book here (Limited release.)

[1] 666,491 sales development representatives employed in the United States according to Zippia (2023)

[2] Pavilion - state of sales development Survey (Fall 2022)

[3] Ziprecruiter,  BuiltIn, Indeed, Comparably, Salary.com (Average, 2022-2023)

[4] SSA.gov, National Average Wage Index, 2022

[5] Pavilion - state of sales development Survey (Fall 2022)

[6] Average reported number across reports from:  Inside Sales - The state of sales development (2017), MarketStar (2022 Sales Development Benchmark Report) and Salesloft Revenue Team Benchmark Report (2023)

[7] https://help.salesloft.com/s/article/Analytics-Metric

[8] Salesloft Revenue Team Benchmark Report (2023)