Our contributing writer and former sales development representative Cody Short authored “SDR Compensation Plans to consider for 2023.”
In 2015, I moved to Austin, TX, to start my career in tech sales. I worked at a large Fortune 500 company in an entry-level position role as a Business Development Representative (BDR).
BDRs, also referred to as sales development reps (SDR) or market development reps (MDR), do the grunt work. They are often a prospect’s first impression of a company. Because of this, reps like myself looked to be compensated well for their work.
In my first role as a BDR, I earned variable pay based on the Qualified Opportunity plan. My team and I had a quarterly quota that entailed bringing in nine qualified opportunities. Those nine opportunities could fall into two categories: Stage One and Stage Two, and we had to bring in five and four opportunities, respectively.
My company defined Stage One opportunities as prospects we booked for a meeting who qualified to buy the product according to budget, need, integration capability, and buy-in from the decision maker.
Stage Two entailed everything from Stage One with the addition of another meeting booked to move the conversation forward. At the handoff between the SDR and the account executive (AE), the AE would then classify which stage the opportunity falls under.
This is the type of compensation plan that I had as an SDR. A single bonus rate is applied to every qualified lead that an SDR creates. This plan allows for an SDR to get paid on every opportunity they pass on for an AE to work. The most important guideline to establish beforehand leaders involves clearly defining what classifies as a qualified opportunity.
For instance, remember Stage One and Stage Two opportunities?
You can create something similar that is easily trackable with a scoring system. I had to bring in five Stage One and four Stage Two opportunities, and that was how my manager kept track of my success and quota.
I like the Qualified Bonus Opportunity plan because it incentives the SDR to create quality leads for the AE. And, as a result, builds a good rapport between SDRs and AEs.
This compensation plan is probably the most unpopular for SDRs.
That’s because so much of the SDRs success lies outside of their control. In order to gain any variable pay from this, the AE must win the deal.
As far as mechanics, this plan applies a fixed rate, or Single Rate Commission, to every Closed/Won deal that began as an SDR lead.
One of the upsides of the plan, however, is the potential for lucrative payouts.
Example: If the SDR’s monthly quota is $50,000 at a payout of 5% of all closed/won deals, that’s $2,500 a month if they hit goal.
So, what happens when an SDR brings an AE multiple qualified leads, but the conversion rate to closed/won is 5%? The answer is in the next paragraph…
This is the type of compensation plan that I wish I had as an SDR.
According to Garner, the conversion rate of a qualified opportunity from an SDR to a Closed/Won deal should be at least 20%.
At that conversion rate and paired with this compensation structure, the SDR will focus on generating qualified leads and gain an extra kicker upon those leads closing.
Winning the deal leans entirely on the AE — not the SDR. So, if an SDR hits 100% of their qualified opportunities quota, anything they make on top of that from a closed/won deal is the cherry on top!
Here’s an example: If an SDR hits 100% of her quarterly quota, she earns $5,950 for the quarter. That’s $2,975 from seven qualified opportunities at $425 each, plus an additional $2,975 from a quarterly quota of $175K in closed/won opportunities paid at 1.7%.
Not bad. Not bad at all.
About QuotaPath and Compensation Hub
QuotaPath’s new free (and ungated) resource, Compensation Hub, allows sales leaders to discover, compare, build, and customize compensation models from 15 templates. Adjust variables to your business and evaluate and optimize comp plans to ensure they’re driving the right results. Share with your team and automate it directly in QuotaPath.
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