There are a few areas that are important to making sure you set people up for success both in setting KPIs and then in making sure they are realistic and achievable.
1. Use proxies – talk to peers in the industry and find out established benchmarks and then try to adjust for your business and its lead flow and sales cycles. For SDRs we see the following benchmarks for initial KPIs:
- Enterprise: 8-12 sales qualified leads per month
- Mid-market: 15+ SQLs per month
- SMB: probably shouldn’t have SDRs, but if you do, they need to produce a very high volume of leads to justify the cost over time 40+
These ranges are for outbound reps and the numbers are 1.5-2x for inbound reps. Usually they need to run about 1.5-2x the number of appointments to get to this SQL number as well. These are rough estimates based on our work with 100s of startups and what we have seen mid and top-level performers achieve.
For AEs, setting quotas can be more difficult. In the early days you might be okay with a ratio of OTE (on target earnings = base + commission) to a quota of 2-3:1, but over time that number should grow. We see some early stage companies that are at 10:1 and that’s not necessarily healthy either. It could mean that your reps have too many leads or that your expectations are too high. You may be able to have numbers like this in the short term but over time it will be better to spend more money to gain customers as penetration is more important than margins.
These are approximations that need to be adapted to your business but should be a starting spot for setting targets. Then you have to wait and see.
2. Don’t be scared to say “I f^%#ed up and we need to adjust.” Having a high quota that only 20% of people hit on a monthly basis is also not good for culture or moral. We’ve met founders and sales leaders who set targets like this and then wonder why they have turnover. It probably means that your numbers aren’t realistic or your process has serious flaws. If it’s the latter then it’s your f*^% up as well for not setting them up for success.
Don’t adjust quotas for weak performers, but also be realistic that you may have made a mistake. Many founders that start hiring early set quotas based on what they did or their first few reps did which is completely UNREALISTIC. Why?
- The leads are worse! Yes, you and the first few reps you hire will naturally gravitate toward the low hanging fruit. That means less as you scale, so you have to set people up for success
- No one can get as passionate or emotional about the product as the founder. You can get people 80% of the way, and that’s good, so don’t expect to clone you. You can clone talk tracks which will help, but it still won’t usually equal your energy.
Jake Dunlap is the Founder and CEO of Skaled.
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