The SDR Funnel Math – Fix the Key Metrics Before You Increase the Size of Your SDR Team

sdr funnel math

As we work with clients, we hear the same questions over and over again: Should we hire more Sales Development Reps (SDRs), or sales reps? Or both?

And our response has been invariably the same—it depends.

  • If your conversion metrics are all good, then by all means hire more.
  • If not, fix your conversion metrics first before you hire more. Otherwise, you are throwing good money after bad.

Let’s say your sales goal is $10 million and your average deal size is $100,000. This means your reps need to close 100 deals. So far, looks pretty straightforward.

Here is where the “it depends” part begins.

·   If your average closing ratio is 10%, then you will need 1,000 opportunities in your pipeline

·   If your average closing ratio is 20%, then you will need 500 opportunities in your pipeline.

Just this one metric alone clearly demonstrates that improving the quality of the pipeline reduces the burden on both your sales and SDR teams. SDRs don’t have to book as many meetings, and sales reps don’t have to struggle to work with so many prospects at the same time.

It also makes it easier to see why you will not need to hire more SDRs or sales reps with the second scenario, while you are more likely to believe you “need” more of both with the first one.

The SDR Funnel Math

But, I’m sure you know it’s more complicated than that.

Working with the conventional three-tier funnel model (Top, Middle, and Bottom), Marketing is supposed to keep filling the Top of Funnel (TOFU) with qualified prospects so that enough go to the Middle of the Funnel where your SDRs call to qualify and book appointments for the Sales team, which works on the Bottom of the Funnel to push prospects through the funnel to a close.

For this article, we will focus on understanding what is happening in the Middle of the Funnel.

Let’s say on average, each of your SDRs can book around 5 meetings a month, of which sales accepts about 70%, and of those Sales accepted meetings, about 66% make the meeting (one-third are no-shows or cancellations because the prospects didn’t see any real value in making the meeting).

Also, let’s say the average deal size of these leads were they to convert is about $75,000

So, the pipeline value that your average SDR is building for the sales team is =  5 meetings x 70% acceptance rate x 66% show rate x $75,000 or  $173,250/month per SDR. Not much, and may be the reason why you were thinking of hiring more SDRs.

However, before adding to your payroll cost, think of what can be improved.

What if I showed you that you can increase the average pipeline to $484,500/month per SDR—a 180% increase in pipeline built?  Would you first look into that to see if that were possible, or still go ahead and waste time and money hiring more SDRs?

I am going to assume you said you wanted to first look into how you can increase the average pipeline built by 180%.

Key Metrics

Looking at our formula above, there are four key metrics we can improve:

1. Average meetings set by a SDR per month

2. Average Sales acceptance rate (a measure of quality of the meeting)

3. Average meeting show rate by prospect (also an indication of the quality of the meeting set)

4. Average deal size (again, a measure of the quality of the meeting)

Improving any one of these metrics will improve the average pipeline size built by each SDR. Improving all four metrics will dramatically improve the average pipeline built by each SDR.

The Before and After In Action

Look at the chart below:

sdr funnel math

We see that we are making small improvements in the range of 20% (for appointments set per month/SDR) to about 36% (number of appointments accepted by Sales).

And yet, the cumulative impact is 180% increase in sales pipeline built

Not just Pipeline Metrics—Sales Metrics also Improve

In fact, you can argue that if you improve the quality of the pipeline (highly qualified and more motivated prospects in the pipeline), then the average closing ratio of your sales reps should also improve. After all, they are meeting with the right people who are also highly engaged.

If we assume we improved the average closing ratio by 25% (from 20% to 25%), then actual booked sales will improve by a whopping 250%–just from the above quality tweaks.

Training and Support–The Secret Sauce to SDR Funnel Math

Improving the SDR metrics and understanding SDR Funnel Math is the key to improving sales metrics. And the secret sauce to that is training and optimizing your existing SDR team.

Before you hire more people, fix these metrics. As an old mentor of mine used to say, “First, Nail it. Then, Scale it.”

Would love to hear your thoughts on this. Let’s schedule a call to see if we can help you analyze your current SDR operations and see if there are any gaps that need to be addressed. Visit our homepage to learn more about us.

How Prospect Education Can Drive the Sales Funnel

The Sales Funnel is a way of defining the process. Prospects will go through when getting educated enough to want to meet with Sales. In the following sections, we’ll be breaking down the three stages of the Sales Funnel that make up the buyer’s journey. Additionally, we’ll highlight which Prospect Education content will be the most helpful to Prospects at each stage. Content is becoming increasingly important in the B2B Marketing world today. Studies have shown that the use of Prospect Education content is now one of the top strategies for 77% of B2B marketers. 

Because these stages relate to different levels of engagement and awareness, the content that should be sent out to buyers will differ depending on what is the most relevant to their interest level. What’s important to note here, too, is that actively searching and fully engaged prospects will enter the funnel from the top like everyone else一 but will then progress through the stages very quickly, hence why it’s so helpful for Marketing to nurture Educated Prospects to meet with Sales.

Prospect Education is the best way to drive the Funnel; attracting more prospects to the Top and helping others advance to the Bottom and eventually on to meet with Sales.

prospect education sales call

Top of Funnel (TOFU)

The Top of Funnel (TOFU) is where your prospects begin their buyer’s journey. Depending on what level of Buyer Readiness each individual prospect is at, the speed at which they progress through the funnel will vary. 

Before prospects can reach the TOFU stage, they must first get acquainted in some way with your company. Demand Generation content is broad, less targeted content that’s meant to attract new prospects to your funnel. This type of content should be created to attract the most people possible and to be broadcasted easily to a large population. The emerging strategies Marketers use today are mainly SEO (optimizing access to blogs, podcasts, or other content) and online ads (perhaps on Google, Facebook, or YouTube), which can all attract attention to, or at least spark awareness of, new products. 

In engaging with this material, the Prospect is sent to a landing page that describes the asset and if they are interested, they’ll fill out their contact information (typically start with just first name, last name, email, and title). Then, they’ll get added to the top of funnel. 

For these unaware Prospects, having online content readily available is the only way for them to find their way into your funnel. Additionally, for Prospects who are already aware of their problem and are close to purchase-ready, letting them find your content is the best way to escalate them quickly through to the Sales level.

Once a prospect is added to the top of funnel, they’ll therefore need quite a bit of education and nurturing before they may graduate to later funnels, and they often repeat the cycle in TOFU a couple of times before progressing. 

What prospects need at this stage is lead generation content, which is generally shared with them through email nurturing. This will still be very broad and educational in nature一no need to give them the hard sell just yet. Instead, it will build up trust over time as they slowly start to recognize their problem and realize the power of your solution. Light, easily digestible content like relevant blogs, short quizzes, or engaging infographics can all educate buyers at this level. 

Middle of the Funnel (MOFU) 

As TOFU prospects engage with the content you send them in their targeted nurture emails (clicking, downloading, etc.), they’ll eventually work their way down the funnel to the middle, at which point the marketing content to be sent to them will become a little more specific and targeted. 

MOFU prospects make up about 20-30% of your target market and have generally already begun to have conversations with Sales to assess their options. At this point, Marketing’s job is to give them all the information they need to see why your company is their best option. This content will be more specific to your solution in particular and can take on a more aggressive sales approach. Content like buyer guides, case studies, white papers, third-party analyses of your product, and competitor comparisons are all good options for prospects in this range.

Bottom of the Funnel (BOFU)

Once the prospect has narrowed down their options to a select shortlist and has started looking at pricing, they can be moved to the more Sales-oriented level at the bottom of the funnel. Clicking on the demo/meeting request button will also instigate this. BOFU prospects represent around 3-5% of your target market and are already fully aware of their problem and of their options in resolving it一they just need to find which product is the best fit. 

Actively searching prospects will advance to this level quickly if Marketing educates them effectively when they initially reach the TOFU. Otherwise, prospects can reach this level through extensive prospect education during their buyer’s journey. 

BOFU engagement will lean more towards the Sales side of Marketing, with the ultimate goal being to book a chat with a Sales rep and sign a deal. Chats about pricing, appointments, and deliverables, and customer testimonials will all be relevant to BOFU prospects at this point.

Recapping

Having the right content in Prospect Education available to Prospects during their buyer’s journeys will help them advance down the Funnel and encourage them to eventually meet with Sales. It’s important to have content available that will meet them where they are in their buyer’s journeys. To read more about this type of Prospect Education, and why it’s so important post-Pandemic, click here.

You can find more resources like this on the SOMAmetrics website under resources. Or click here to schedule a call if you would like to speak with one of our associates.