Terminology: SDR versus BDR

Since there is no industry standard terminology, I do not distinguish between the SDR and BDR job titles (or other variations like ADR). Rather, I tend to refer to xDRs as inbound SDR, outbound SDRs, or hybrid SDRs. That being said, many use SDR for inbound and BDR for outbound.

SDR Compensation

The following is SDR OTE as of February 2024 (source: GlassDoor – Information Technology). The typical mix is 65%/35% and ranges from 60%/40% to 70%/30% with the latter more common.

Percentile	Austin	New York	SF
25th	$64K	$68K	$72K
50th	$77K	$81K	$87K
75th	$95K	$100K	$107K

SDR variable compensation is usually tied to one or more of the following metrics:

• Meetings held between AEs and prospects)
• Opportunities sourced
• Pipeline sourced
• Bookings

I strongly recommend linking 100% of SDR variable compensation to number of qualified opportunities sourced (i.e. demo/discovery meeting held by AE with prospect and deemed to be qualified) since this strikes the best, albeit not perfect, balance between financial performance, SDR effort, and SDR skill.

Why I don’t like paying SMB SDRs on meetings held: Paying on meetings held is the least contentious way to compensate SDRs. There is no AE/SDR tension over what constitutes ‘qualified,’ no waiting for AEs to update CRM, the tightest link with SDR effort, and a strong link with SDR skill. However, I would only pay on meeting held if SDRs have limited choice on account selection and if the company is relatively indifferent to prospect persona within the accounts. Those are very big ifs! More commonly, companies are better off adding friction to ensure the meetings SDRs schedule are likely become customers.

Exception: I would pay Enterprise SDRs on meetings held especially to encourage multi-threading on existing opportunities. It is fine for first meetings too since the accounts are likely prequalified and the AE is likely directing the SDR on whom to engage.

Why I like paying on opportunities sourced: As just noted, paying on qualified opportunities sourced adds a bit of friction to ensure early pipeline is real. After the demo/discovery meeting is held, the AE can either qualify/advance the deal or disqualify it. AE win rates should then be measured based on qualified opportunities; AEs should not be able to disqualify opps once qualified. I have seen leaders seeking to pay SDRs on later stages but I do not recommend this since (a) SDRs have limited control over deal progression after qualification and (b) this creates an inefficient incentive to push lower quality deals further down the pipeline since AEs want to help their SDR friends.

Why I don’t like paying on pipeline sourced: SDRs have limited control over deal size. Moreover, paying on pipeline sourced creates incentives to artificially inflate deal sizes which reduces forecast accuracy.

Why I don’t like paying on bookings: SDRs have limited control over ultimate bookings. In addition, there is often a long time lag between SDR effort and when deals close. For reference, those who do this typically pay 1% of bookings as a SPIF rather than as part of OTE.

SDR Manager Compensation

1st line xDR manager quotas should be the sum of their team quotas but reduced by 10% to 20% (typically 15%). This is an over-allocation buffer. The 1st line manager quota is the company quota; there should be no additional buffer for 2nd line (and above) leaders.

We see a broad range in base/variable split for 1st line SDR managers – from 60/40 to 80/20 but typically closer to 60/40.

Director OTE	Austin	New York	SF	SLC
25th	$201K	$201K	$221K	$175K
50th	$265K	$265K	$285K	$230K
75th	$356K	$356K	$382K	$311K

Are SDRs Exempt or Non-Exempt Employees?

(Disclaimer: Information in this section is for general guidance. Please consult an employment attorney with knowledge in your jurisdiction.)

TL;DR: SDRs are most likely non-exempt and therefore must be paid overtime.

In the United States, the Department of Labor (DOL) enforces regulations under the Fair Labor Standards Act (FLSA) to determine whether employees must be paid overtime (non-exempt/”hourly”) or not (exempt/”salaried”). In addition, some states (or other countries) may impose even more stringent guidelines.

SDRs do not fall into most of the exemptions on the current DOL fact sheet such as those for Executives, Administrative Employees, Learned Professionals, Creative Professionals, or Computer Employees. This leaves two other possibilities – Outside Sales or Highly Compensated Employees.

To qualify for the Outside Sales exemption, employees must be obtaining orders away from the employer’s place(s) of business. Since SDRs don’t close, they do not qualify under this exemption.

To qualify for the Highly Compensated Employee exemption, employees must both:

• Earn a guaranteed salary of more than $684 per week ($34,568 per year) and receive total annual compensation of $107,432 or more.
• Perform one of the duties of exempt Executive, Administrative, or Professional Employees.

Even on the off chance SDRs met the total annual compensation threshold, they don’t manage employees (Executive), work on general business operations (Administrative), apply advanced knowledge in the field of science or learning (Learned Professional), or perform artistic or creative work (Creative Professional). Hence, SDRs are non-exempt in almost every situation.

Separate Inbound/Outbound Versus Hybrid

As soon as you have enough quality inbound lead, I strongly recommend splitting the SDR function into separate inbound SDRs and outbound SDRs. How much is enough? A consistent stream of at least 30 per month. What is a quality inbound lead? A “Contact Us” form response or demo request and not an MQL that achieves a score threshold based solely on content consumption.

In terms of quality, product-led growth (PLG) leads sit somewhere in the middle between inbound & inbound. Assuming the PLG-to-Enterprise sale involves reaching non-user decision makers, the motion is much more outbound.

Why I advocate splitting the SDR role:

• The skill set for responding to a warm inbound lead is very different than the skill set for engaging an outbound account
• Since inbound SDRs get conditioned to be reactive, they are on a career path toward Customer Success, Support, or Marketing. In contrast, outbound SDRs are in-training to be AEs.
• Hybrid SDRs become over-reliant on inbound. Hence, outbound performance suffers.

While it is a semi-extreme position, I advocate routing 100% of inbound leads to inbound SDRs (see caveat for Enterprise SDRs in this section just below). This is true even for accounts that are already assigned to or engaged by outbound SDRs. This is a prospect-first rather than employee-first point of view to ensure inbound leads get the most rapid response.

There is a compelling argument to be made that the inbound SDR role should not exist; rather, high quality inbound leads should be routed directly to AEs. I agree IF:

1. A high % of inbound leads convert to qualified opportunities
2. You have strong systems (ex: automated cadence/sequences with calendaring) and processes in place to ensure rapid & compete response.

In addition, inbound tends to skew heavily toward SMB. For Enterprise, I support having hybrid SDRs since the benefit of having deep account knowledge outweighs the cost of (possibly) slower response.

SDR Quotas

SDR variable compensation may be based on a mix of meetings held, qualified opportunities, pipeline generated, and/or bookings. However I prefer to pay only on qualified opportunities. Here is why I don’t like the others:

• Meetings held: While paying on meetings held creates the least amount of friction between AEs and SDRs, the downside is that SDRs will set up too many useless meetings. This is a drag on valuable AE time. The only time I’m OK with paying on meetings held is when SDRs have assigned contacts from assigned accounts such that there is no doubt the person they are prospecting meets the MQL definition.
• Pipeline generated: Paying on pipeline generated encourages reps to inflate deal sizes which corrupts the forecast.
• Bookings: Booking are typically too far in the future and too out of control of SDRs.

I define qualified opportunities as: meeting was held and AE created an opportunity (or advanced a Stage 1 “Prospecting” opportunity to Stage 2).

Set quotas such that 50% to 70% of SDRs meet or exceed the target each month. As of 2023, that will likely be 6-8 qualified opps per SDR per month for cold outbound and 30 qualified opps per month for inbound. If prospecting using PLG leads, the target is 15-20 qualified opps per month.

Turning SDRs into AEs

First, let’s start with reasons not to create an AE career path for some or all SDRs.

• The first question to ask yourself is, SHOULD you promote your SDRs into AE positions? If you would not hire an early career professional from the outside into an AE role, then you should think twice about promoting your SDRs. This is a function of both skill and gravitas. For example, one would probably not want recently former SDRs selling complex enterprise solutions to senior executives in large companies.
• Unless your AEs are not expected to prospect, i.e. their days are filled with meetings from inbound leads, partners, etc., then you should not promote inbound SDRs into AE roles. Instead, establish a career path into customer success, support, or other non-AE jobs..

Assuming you are looking to promote outbound SDRs into AEs, esp. serving an SMB buyer, here are some guidelines:

• Create a career progression with targets that align to the duration you’d like your SDRs to be in-role. For instance, let’s say you want SDRs to remain in role for 18 months and typical monthly production is 8 opps/SDR/month. Then, you expect SDRs to generate 144 opps (18×8). Let’s adjust a little bit for ramp and reduce the cumulative opp goal to 135. Your progression would be:
  • SDR I: 0-45 opps
  • SDR II: 46-90 opps; give a base and/or bonus increase
  • SDR III: 90-135 opps; give a base and/or bonus increase
  • SDR VI: 136+ opps; give a base and/or bonus increase; promotion eligible to AE.
    It is important to say “promotion eligible” since (a) there may not currently be an AE position available (b) the SDR may still need to interview for the AE role
• Though you may start sooner, start exposing SDRs to the entire sales cycle as of the start of the SDR III phase. A great way to do this is to assign the SDR to an AE mentor (or two) whom them they can shadow. The AE mentor(s) should be in the segment into which you intend to promote the SDR. In addition, strive to maintain an end-to-end library of call recordings for a successful deal.
• In the SDR III phase and beyond, have the SDRs run through the full AE onboarding and participate in ongoing AE training. Deep product knowledge is especially important but so too are the other core skills of sales process, sales methodology, negotiation, competitive positioning, objection handling, presenting, closing, etc.
• Some companies lower SDR quota during this AE training phase but most do not. My advice would be to lower quota slightly to allow for training & shadowing time.
• Some companies insist that AEs allow SDR IIIs to lead discovery calls for meetings the SDRs have booked. In this case, AEs must be on the calls to provide aircover and feedback. SDRs may also have other responsibilities such as helping create quotes or draft proposals.

SDRs & In-Person Events

Should you send SDRs to staff event booths? In a word, no. While this may be a tempting “reward” for strong performance, SDRs who travel will invariably miss targets unless you provide quota relief. Even if you do provide quota relief, you are negatively impacting pipeline at the top of the funnel. Staff event booth with non-quota-bearing people from product, marketing, sales engineering, etc. and leave your SDRs at home to do their jobs.