Outsourcing business development can often be seen as a costly option for businesses, but when you take a closer look at the investment that goes into building an internal BDR/SDR team, you may be surprised by the results. All things considered, outsourcing business development can save you a significant amount of money – not to mention the time it takes to build a successful sales team.
In this blog, we break down the true cost of building an inside sales team, including all the hidden costs beyond the BDR/SDR’s salary, which may not be obvious at a first glance.
Outsourcing business development – where to start
A great way to start defining how big your BDR / SDR team should be is to identify how many inbound leads your marketing team is producing. As a guideline, we suggest that a single sales resource should be working through 300 marketing qualified leads every month based on 20 working days at a disposition rate of 15 leads per day. Anything less than this and the resource will most likely be making up the rest of the available time doing hybrid activities — which can be a nightmare to manage.
It’s also worth considering the territories that your inbound leads are coming from. If you have 150 coming from the US, 50 from the UK, 50 from Spain, and 50 from Germany, hiring a sales rep will only be worthwhile if you can pull off the minor miracle of finding a trilingual salesperson. By outsourcing business development to Operatix instead, you can take advantage of our multilingual team – they can speak 17 languages and accelerate market entry in 107 countries.
You may also find that if you’ve hired a full-time resource that is dedicating a large amount of his or her time to proactive sales activity due to a lack of inbound activity in their native tongue, it can be very difficult to motivate and manage this element of their role.
The bottom line is if inbound demand is very clearly demonstrable for your company and manageable in terms of language restrictions: go ahead and build your own sales team. If you are lacking inbound response demand, then you’d better hope you have an extremely strong, disciplined, and consistent management system overlooking your sales team. Otherwise, outsourcing your business development is likely a more beneficial and efficient choice.
The Cost of an Internal BDR team vs Outsourcing Business Development
At face value, it can easily look as though recruiting your own sales development team makes far more sense than outsourcing this function. Why pay a premium to outsource business development, when it can seemingly be done so much cheaper in-house? It’s a very good question and one that yields a surprising answer.
The true cost of hiring an inside sales representative is easily overlooked, as there are many factors that businesses can fail to take into consideration when weighing up building an internal team vs outsourcing business development.
The average base salary of a Sales Development Representative in San Francisco is estimated at $58,000 according to Glassdoor (as of March 2022). At this rate, we can expect that with commission factored in, the total cost of one resource would be $80,000. In London, the same resource would cost around £50,000 (£ 35,000 being salary + £ 15,000 commission). However, the average cost of an inside salesperson is for exactly that — an average salesperson. To hire a top-performing salesperson, at least 10% of the salary should be added on top. This puts the salary at $88,000 in The Bay Area and £55,000 in London.
The true cost of hiring a Business Development Representative is easily overlooked, as there are many factors that businesses can fail to take into consideration.
Aurelien Mottier – CEO – Operatix
Other various employer charges such as benefits, pension, and medical care all add up as well, and we can assume that these costs will add another 15% of the sales rep’s salary to the employer’s outlay. We’re now looking at salaries of $101,200 in San Francisco and £63,250 in London.
Management of the resource is another cost often overlooked. If your sales manager is looking after seven to nine resources in total (an industry average according to Pavilion’s Sales Development Report – see Slide 31), it’s fair to allocate 12.5% of the manager’s salary as an added cost to each salesperson. On the basis that your sales development manager is earning at least 10% more than the sales rep, the sales rep’s total cost per annum is now at $113,300 in San Francisco and £70,750 in London.
Technical expenses for an inside sales representative such as database systems and software license fees are another unavoidable yet often unconsidered cost. For this expense, we can expect to add around $500 per month in San Francisco or £350 per month in London. With licensing and data expenses added in, the annual cost of an inside salesperson is $119,300 in San Francisco and £74,950 in London.
Miscellaneous expenses such as the cost of seats, essential office equipment, and bills are a relatively meagre addition, so we can assume that they add around $2000 annually in San Francisco and £1000 in the UK. This now leaves us with a figure of $121,300 per annum for an inside sales representative in The Bay Area, or £75,950 in London.
Already these figures are considerably higher than the $89,000 and £50,000 OTE salaries of an inside sales representative. And that’s not even factoring in the costs of recruitment and replacement.
The cost of initial recruitment is anywhere between 12% and 22% of the salary according to recruitment experts Quarsh. Utilizing the minimum 12% cost of recruitment, the total cost of a sales rep is, so far, at $129,220 in The Bay Area, or £80,750 in London.
The cost of replacement comes into play when your salesperson is either: promoted, poached or moved on. On average, a salesperson stays in their job for around 2 years, according to Sales Readiness Group statistics. A Center for American Progress study found that it costs, on average, 16% of the yearly salary to replace an employee. If you’re paying 16% of the salesperson’s salary every two years to replace them, you can average that cost out to 8% of the salary per year. With the cost of replacement factored in, the total figure for an inside sales representative’s yearly cost comes to an estimated $134,500 in San Francisco and £83,950 in London.
The total figure for a Business Development Representative’s yearly cost comes to an estimated $134,500 in San Francisco and £83,950 in London.
Aurelien Mottier – CEO – Operatix
These numbers aren’t even taking into account the cost of training & development, sales playbook, and the ramp-up period expected until an SDR is fully delivering results.
Reputable Outsourced BDR agencies will charge anything between $ 10,000 to $ 15,000 per month for a program, so If you’re struggling with pipeline generation, then take these total figures and think again. Is outsourcing business development really more expensive than setting up an inside sales team?
Find out more about how outsourcing business development can help you accelerate sales and market entry by getting in touch with Operatix. Specialising in B2B tech and software, our teams are highly experienced in generating revenue for businesses across the globe.