Modern B2B sales requires reaching sophisticated customers who’d rather do research online than speaking with a sales rep over the phone. Armed with vast amounts of information, modern buyers demand more and more from sellers.
That’s why the process from lead to customer can be long and expensive.
It would be great if your sales team could talk to the right prospects all the time, just by picking up the phone — but the truth is that getting to talk with the right people is a long journey that doesn’t start with sales; it will either start with marketing or sourcing a list of targeted leads.
Let’s dig deeper.
The Marketing Journey
The journey begins with the lead generation process, where companies attract potential customers through content marketing, social, emails, events and other marketing efforts to obtain their contact information and add them to their CRM. Once leads are in the database, the marketing team begins to nurture them, feeding them relevant information to take them further in the buyer’s journey.
The crucial step in the marketing journey is to determine if each prospect is actually a Marketing Qualified Lead or MQL (a lead more likely to become a customer than any other lead), based on their demographics and behavior.
Although by now some considerable time has passed and you’ve spent money and resources in marketing and advertising to obtain these MQLs, your sales reps haven’t spoken to them yet.
Each sales team determines which criteria to use to determine if a lead is just interested or if they’re ready to buy in a process known as Lead Scoring. The higher the score, the closer they are to become a Sales Qualified Lead (SQL).
This is where the sales team comes in.
An Alternate Route
Even if you don’t have a marketing team, you can still get some good leads for your sales team to work with.
Companies such as Zoominfo, Discoverorg and Apollo.io provide lists of targeted B2B contacts from large databases for a fee or a subscription. Other tools such as LinkedIn Sales Navigator are great for finding prospects and contacting them directly on LinkedIn or you can pull a list from Sales Navigator and then use Seamless.ai to find their contact details.
For instance, when you outsource sales, you can hire a remote sales team to make qualified sales appointments from a list of leads from one of the sources above, or outsourced companies will generate the leads for you. The outsourced sales reps would use an omnichannel cadence to touch the leads multiple times in order to engage them in an effective sales conversation. That way you could start developing a sales pipeline even if you don’t have a full in-house marketing and sales team.
The Sales Journey
In this stage of the pipeline, the sales team has determined that the lead is a potential customer. The SQL is someone who has entered the buying cycle. Unfortunately, not many leads make it this far. According to MarketingSherpa, only 27% of B2B leads are sales-ready.
How did the lead get to this stage? Perhaps he or she visited your website multiple times, downloaded a sales guide or requested a demo.
With a list of SQLs in your CRM, your Sales Development Representatives (SDRs) will be ready to start making sales appointments.
What's involved in this process? For starters, it involves many calls and messages over a period of time—some buyers are more responsive than others, depending on the industry.
Once an appointment is made, an Account Executive (AE) will usually take over to close the deal.
However, not all appointments are made equal. There is a huge difference between a sales qualified appointment and any other appointment. If the SQL is not really ready to buy, the AE will waste his or her time talking to someone who’s just researching or doesn’t have the budget to buy your solution.
A good Sales Qualified Appointment has been human verified. In other words, a sales rep has called the lead and determined if your product or service fits the buyer’s needs, what the timeline for buying is and their budget. If the solution is a fit, the purchase timeline is close and a decision maker has vetted the budget, then that lead is ready for the AE.
How valuable then are Sales Qualified Appointments to your business? Probably a lot. If you could ensure that your sales team only gets qualified sales appointments, you could probably build a great pipeline and increase your revenue.
As you know from experience, this is easier said than done. Setting up a marketing and sales funnel that works consistently can cost you a lot of money.
How much? Let’s look at the details in the next section.
Calculating the Cost of a Qualified Sales Appointment
In a previous article, we’ve calculated the cost of a marketing lead, noting that the average cost per lead is $198. This value will vary a lot depending on your industry, target market and competition.
Now, to calculate the real cost of a qualified sales appointment, we need to take into account all the costs incurred by your sales team, especially the SDRs.
What is the role of an SDR? SDRs identify and qualify prospects for the sales team. SDRs are responsible for sourcing up to 45% of a company’s revenues.
SDRs pre-sales activities:
- Making cold calls
- Sending outbound emails to prospects
- Setting up appointments or introductory meetings
- Qualifying webs visitors through chat conversations
Setting up an in-house sales team costs a lot of time and money. Here’s a breakdown of the costs involved.
According to the Bridge Group, you can spend a total of 1,170 hours hiring reps over a period of several months. The average cost to hire a single SDR is $4,129.
What’s worse, the average tenure of a sales rep is 15 months, and according to a report by DePaul University replacing a rep costs organizations $97,690 on average.
Once you hire a rep, you’ll spend three months training him or her - the average ramp up time is 3.2 months or about 108 days. That means you’d have to pay a salary for those days that the sales rep is not productive yet.
3. Salary and benefits
We’ve calculated that hiring a full sales team in-house (with 4 SDRs and support staff) may cost your company more than $485k per year with salaries and benefits.
Here are the numbers:
- Average SDR salary in the U.S.: $48,412/year + $7,261/year in benefits = $55,673 (222,692 for 4 SDRs)
- Average Sales Manager salary in the U.S.: $99,299/year + $14,894/year in benefits = $114,193
- Average Sales Trainer salary in the U.S.: $72,829/yr + $10,924/year in benefits = $83,753
- Average Quality Analyst salary in the U.S.: $56,616/yr + $8,492/year in benefits = $65,108
- Total: $485,746
4. Office space
On top of salaries and benefits you’d have to pay for office space. Then add desks, chairs, computers, phones, internet connection, utilities, maintenance, cleaning and more (around $12,000 per employee).
5. Technology stack
Add the cost of technology, such as specialized software, licensing fees per user and IT staff. The average cost for these per SDR is $3,287 per year.
The actual costs will vary depending on your industry, location and other factors, but for the sake of this example, let’s calculate the total cost from the numbers above for one SDR.
- Recruitment: $4,129
- Salary and benefits: $55,673
- 25% of support staff: $63,763
- Office space and equipment: $12,000
- Tech stack: $3,287
- Total: $138,852
So what is the cost of a qualified appointment?
The Bridge Group report estimates the average SDR has a target of 10 qualified appointments per month and quota attainment is 68%. We can therefore say that a typical SDR makes 7 (10 x 68% = 6.8) qualified appointments per month, or 84 per year. If it’s a new SDR, we’d have to subtract training time, so that would give us 48 appointments.
Now, let’s divide the annual cost of an SDR by the number of sales qualified appointments he or she makes in a year.
- $138,852 / 84 = $1,653
- New hire: $138,852 / 48 = $2,892
This is by no means applicable to all cases and industries, but a ballpark estimate based on available data. Some companies have sales teams that make a lot more qualified appointments per month as their product is cheaper for example so their cost per qualified sales appointment would be less. You can adjust the figures above to your own team’s performance and costs.
Is there a better way?
More and more companies are deciding to outsource sales for different reasons, but especially to save time and money. Outsourcing your sales team can significantly reduce the cost of a qualified sales appointment.
For instance, while an in-house SDR would cost $138,852/year, a CloudTask team could cost you much less per year (including support staff and all the other factors considered above). So you can say that outsourcing could in fact be a better way. It’s also not just about cost, but also quality.
If you have questions about outsourcing your sales team, check out our guide, Getting Started with Outsourced Sales.