Common Structures for SDR Pay: Meetings Set vs. Percentage of Sales Closed

When it comes to compensating Sales Development Representatives (SDRs), companies often employ different structures to motivate their teams and drive desired outcomes. Two common approaches are paying SDRs based on the number of meetings set and paying them a percentage of sales closed. In this article, we will explore these two compensation models, discussing their pros and cons to help you make an informed decision for your sales team.

1. Meetings Set

Under this structure, SDRs are paid based on the number of meetings they successfully schedule with qualified leads. The compensation may be a fixed amount per meeting or a tiered structure based on meeting quotas.

Pros:

• Clear Focus on Lead Generation: By incentivizing SDRs based on meetings set, you ensure their primary goal is to generate qualified leads and create opportunities for the sales team.
• Measurable and Trackable: It's relatively easy to measure and track the number of meetings set, providing clear visibility into individual and team performance.
• Encourages Quantity: This structure encourages SDRs to focus on setting as many meetings as possible, which can help generate a higher volume of opportunities for the sales team.

Cons:

• Potential Sacrifice of Quality: Emphasizing quantity may result in SDRs prioritizing quantity over the quality of the meetings. They might rush the qualification process, leading to lower conversion rates and wasted sales team resources.
• Less Control over Sales Process: SDRs may pass on leads prematurely to meet their meeting targets, potentially missing out on valuable opportunities that require further nurturing.

2. Percentage of Sales Closed

In this model, SDRs are rewarded based on a percentage of the sales they assist in closing. The compensation is directly tied to the revenue generated from the deals they contribute to.

Pros:

• Focus on Revenue Generation: By aligning compensation with closed sales, SDRs have a direct incentive to qualify and nurture leads effectively, ensuring they convert into revenue-generating opportunities.
• Encourages Collaboration: SDRs are motivated to work closely with the sales team throughout the entire sales process, fostering collaboration and knowledge sharing.
• Promotes Long-term Relationship Building: Since SDRs are invested in the outcome, they are more likely to focus on developing strong relationships with prospects, increasing the likelihood of repeat business and upselling opportunities.

Cons:

• Lengthy Sales Cycle Impact: The time it takes to close a sale can vary significantly in different industries. If your sales cycle is long, it may take a considerable amount of time for SDRs to receive their compensation, potentially affecting their motivation and financial stability.
• Dependency on Sales Team: SDRs' success in closing deals relies heavily on the sales team's ability to convert qualified leads into sales. If there are issues with the sales team's performance or the overall sales process, it can impact the SDRs' compensation.

Choosing the Right Structure

Deciding on the appropriate compensation structure for your SDRs depends on various factors, including your business model, target market, and sales objectives. Here are a few considerations:

• Lead Quality: If your focus is on generating a high volume of leads, the meetings set model may be suitable. However, if lead quality is crucial and requires a more consultative sales approach, the percentage of sales closed model may be a better fit.
• Sales Cycle: Evaluate the length of your sales cycle and how it aligns with your desired SDR compensation structure. If your sales cycle is shorter, the percentage of sales closed model may be more effective, whereas a longer sales cycle may benefit from the meetings set model.
• Team Dynamics: Consider the dynamics between your SDRs and the sales team. If collaboration and handoff are critical for success, the percentage of sales closed model encourages closer teamwork. However, if SDRs primarily focus on lead generation and qualification, the meetings set model may be more suitable.

Ultimately, the key is to align your compensation structure with your business goals and the desired outcomes from your SDR team. You may also consider a hybrid model or incorporate additional performance metrics to strike the right balance between quantity and quality.

By carefully evaluating the pros and cons of each compensation structure, you can design a sales incentive program that motivates your SDRs, drives desired behaviors, and contributes to the overall success of your SaaS company.