How to Structure SDR Compensation

Sales Development Representatives (SDRs) play a crucial role in driving scalable revenue for businesses. When building an SDR team, either as a Sales Leader or as a Talent Acquisition professional, it’s imperative to understand:

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1️. SDR compensation structure;

2️.Designing a robust SDR recruitment process

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The SDR landscape has been hugely competitive over the past few years so designing a compelling compensation package is fundamental to ensure you are able to onboard SDRs at the volume required for continued revenue success via outbound sales channels.

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Jake Tapsell, our Principal Talent Partner at Ortus Talent, shared insights in a recent discussion around the intricacies of SDR compensation structuring. Jake has worked extensively with scale-ups at various stages as an in-house talent acquisition leader, which has equipped him to understand the nuances of high-volume SDR hiring and compensation package rollout.

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Here we dive into the key considerations Jake took when designing SDR compensation plans and creating a fair recruitment process for entry level and experienced SDRs.

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💥 Banding Salaries based on Experience

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The SDR role will vary in targets from business to business but the content of the role will be the same. How do you design compelling salaries for those entering with different levels of experience? Jake suggests creating salary bands.

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Lots of SDRs enter the profession as recent graduates, whilst others transition from other sales-geared professions into SaaS sales, bringing relevant sales expertise. Equally, they could be operating as an SDR at a different platform and looking at new opportunities. Jake stresses the importance of considering candidates from a variety of backgrounds (more on DE&I hiring for SDR teams below).

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Salary banding allow for the variations in experience. When undergoing a data-driven compensation review of SDRs previously, Jake implemented a three-tiered structure to recognise entry-level, 12-24 months, and experienced SDR salaries. These salary bandings shouldn’t be overly complicated as this is counter-intuitive; the idea here is to be transparent and effective hiring in a complex and highly competitive market.

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It should also be said that whilst compensation is important, so too are employer branding and candidate experience. Why should the candidate look to join X firm over Y firm, all other things -including compensation - being equal?

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An example, in the UK:

💥 Entry level with no relevant experience / fresh grad £30,000 / OTE (on target earnings = base salary + expected commission) £42,000

💥 1 - 2 years’ experience as an SDR £32,500- £40,000 / OTE £45,000 - £50,000

💥 2+ years’ experience as an SDR £40,000 - £45,000 / OTE £55,000 - £58,000

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As an example, in the US:

💥 Entry level (as above) $50,000-$60,000 / OTE $58,000-$68,000

💥 1 - 2 years’ experience as an SDR $60,000-$70,000 / OTE $65,000-$75,000

💥 2+ years’ experience as an SDR $70,000-$80,000 / OTE $90,000- $120,000

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OTE is a guideline figure that takes into account the realistic expectations of an SDR, it is usually not guaranteed and based on performance metrics.

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An example: is an SDR is measured by number of meetings per week and they have 4x meetings to hit quota (following ramp-up period) that take place with an Account Executive. The AE will assess the likelihood of the prospect continuing in the sales process following the meeting. These 4 meetings equate to an additional £1,000 per month (£62.50 per meeting).

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SDRs can expect a drop out rate with their booked meetings of c.20% per month. If this figure is missed by x% it would be reflected in the commission accordingly. However, if SDRs surpass this target, as expected by more experienced SDRs, they would receive an inflated commission payment.

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The SDRs should expect a conversion rate of 50%, resulting in the MQL (marketing qualified lead) further progressing down the sales lifecycle. This could take the form of a demo or an introduction to a decision maker within the business, however, this does depend on technology and industry type. These statistics will also be monitored, and if the MQL becomes an SQL (sales qualified lead) and eventual sale this will be mean an additional bonus payment to the SDR.

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💥 Uncapped Commission

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Naturally, SDRs love this! It’s a very common motivator and answer to the question ‘why are you interested in becoming an SDR?’ when asked in interview, which is great to hear as a hiring manager because it demonstrates financial drive.

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It should be noted there are many factors at play when structuring compensation bandings. Ortus are really pleased to partner mostly with Seed to Series A, B - F stage scale-ups at pivotal times in their lifecycles when hiring go-to-market talent is essential to overall revenue strategy.

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Compensation structuring at a Seed stage start up is going to be different a Series C scale up and this will be different from publicly listed companies, and the people team will have spent considerable time rolling out sensible compensation packages. For SDRs, other factors of differentiation include: clients sold into (SMB, mid-market, enterprise), length of sales cycle.

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Beyond the financials, SDRs will be keen to understand other relevant information when deciding whether to join an organisation, especially in recent years where the talent landscape has led to a surge in demand and more diverse offers. These include:

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➡ Remote working and flexible working policy;

➡ Clear and defined career growth and progression;

‍➡ Additional perks: gym and wellness, equity component, if in office a few days per week, breakfast and coffee provided, stipend for setting up a home office

‍➡ A smooth onboarding process;

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💥These matter to candidates more than they previously did and robust additional benefits can be the differentiator for the SDR. The wellness piece is particularly relevant to SDR hires because of burnout.

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Localised Compensation

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To address global and regional differences, companies should consider localised compensation packages. This ensures that employees in different regions are paid fairly based on their local cost of living.

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The world of SDR recruitment and compensation is a bit like a maze. You need a solid plan, some careful thinking, and a good dose of inclusivity to get it right. Jake shared some pearls of wisdom, from crafting fair compensation packages to keeping your recruitment process efficient.

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If you’re looking to hire sales talent in technology, please reach out to hello@ortustalent.com to discuss how we could level up your sales hiring from SDR to VP Sales.

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