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#63: Listen as Mike Farrell, CEO of Green Leads, talks about his experience with sales development and startup companies. He touches on how to set up your growth stage strategically, things to consider with a new sales development team, and whether to insource or outsource sales development.
Explore the human side of sales and business with host Tyler Lindley. Leaders in their field share a dose of inspiration through stories about life and business. Sales professionals provide tactical tips you can put into practice today. It all comes together to help you chart your path forward.
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The Sales Lift Podcast
Episode #63
Building Sales Development from Scratch w/ Mike Farrell
Hosted by: Tyler Lindley
Full Transcript Below:
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[00:00:00] Tyler: Hey Sales Lift nation it's your host. Tyler Lindley. Today I have Mike Farrell on the podcast. Hey Mike, how are you today? I'm great, Tyler. Thanks. Thanks so much for joining Mike Farrell is the CEO of Green Leads, a company that provides B2B technology clients from start to enterprise with meetings, lead gen and content syndication based up in Massachusetts.
And today we're going to be chatting a little bit about how can startup or growth stage of a company's when they're making that decision about what to do with their sales development team, how do they stand one up initially? There's a lot to consider there. Mike, what do you think as companies are considering adding sales development as a function to their sales org, what should they be thinking?
[00:00:45] Mike Farrell: That's a great question. And all these startup companies need to get to that point. That's what they want to get to is their well, their product and forming their go to market strategy. It is a strategic product go to market, but the client. The associated certainly is there the talent you need to do that the internal support you need to do that?
The training and the tech stack. I think the really important thing that some people forget is that the time and opportunity costs lost. The time it takes to do it the time to ramp people up and the potential loss opportunity. If you have some bumps in the road, some failures, some false starts. So there's a lot that goes into it.
It's not just, oh, let me go hire somebody and throw them on the phone. They want to do it right. And you want to have any kind of scale. It takes time to
[00:01:37] Tyler: get there. It's interesting. You bring up that time and opportunity cost, which I feel like is not thought of as much as some of those other things you mentioned, you talked about the cost of it, the talent, the internal support training and tech stack.
Those are common thing that people go to, but that time and opportunity costs is probably the biggest factor. How long should people expect for it to take, to build out a function like this and have sales development start giving a good ROI inside the org. Yeah. Obviously
[00:02:03] Mike Farrell: some of it depends on how much horsepower has put behind it, budget wise and everything from the get-go to really get an organization, SDR, BDR, organization, whatever people want to call it of any scale, it's called five people.
You really hit the mark when you're getting to about seven. Yeah. That's when you really recouped the investment, you got a full-time manager on there and you have all the investments of the tech stack and the data and so forth. And the sales enablement, the training component of it, the training program.
You're probably initially when you start off with a handful of people, you're probably using an outside firm for training, or you have some training staff in house. How many quota carriers do you have? What's the ratio. SDRs BDRs to a quota carrier. That's interesting.
[00:02:50] Tyler: You bring up the ratio. That's really important and it's probably hard to get that right.
Is that something you can take a best guessed at you think initially, and then you dial that in over time or what ratios do you see work for these startup and growth stage type origins?
[00:03:03] Mike Farrell: I would say, I think the best practice is somewhere between one to three AEs to BDR SDR. It depends on if your company culture is the AEs are still doing their own outbound.
Right. If they're just sitting back waiting for. Inbound leads or the SDR to fill up their calendar. Then you're going to need a one-to-one relationship or even a two to one, two SDRs to one relationship because those EAs salary is probably doubled of that, of a SDR BDR. And going back to your original question, I would say that it could be a full 18 to 24 months to see an SDR organization mature, guaranteed that you start from scratch.
There's going to be bumps in the road. There's going to be. Yeah. And you don't have all the infrastructure initially that you want for founders out there. They're making that call. It's, let's get all these items budgeted out. And most of the clients that I've worked with in my career that are startups in this space, they can't wait a year.
They get to that point where they say, yes, we need SDRs. We're ready to scale there's market out there. We got to go get it. They can't wait that time to build it because it takes time. Yeah. But they make the investment to do it. And at the same time, they go out and hire a firm to fill that gap while they're building it up.
And I've seen companies that let go of the firm after they figure they got to build that up. And then all of a sudden, a year or two later, they come back to the firm that they hired. Initially. We've had some other bumps in the road, or there's been a lot of turnover or whatnot. We just can't keep up with the need in terms of the revenue goals.
So we have to augment what we have internally. Gotcha.
[00:04:44] Tyler: So it sounds like the strategy sometimes is to both in-source. If we just make the decision, we want to build out a sales development fund. We can do that in house, but in the interim, while we're going through that ramp period, they might outsource it until it gets to a certain point.
So almost do both which that decision is important as folks consider whether to fully outsource, fully insourced, maybe a hybrid model, like you just talked about what are some things they should consider as they're going through that decision piece
[00:05:12] Mike Farrell: of it is what's. On the other side of the SDR organization is marketing.
What is the maturity level of the marketing organization in terms of. Driving awareness, driving leads, driving people to the website. What does a content creation infrastructure for the company? The other side of it is marketing. You can't just look at it, its own silo because the whole concept of sales and marketing have to work.
Do you
[00:05:37] Tyler: find that a lot of these early growth stage companies have an established marketing function because that's usually something that's cobbled together at that stage of a company's Evelyn.
[00:05:47] Mike Farrell: I find that the CML or a VP of marketing is one of the early strategic hires. A lot of the sales efforts initially are founder led, but they'll hire a marketer and they'll start building up that marketing infrastructure that takes time that takes them back.
And then making sure that there's synergy there, who's following up on all those marketing leads. You got to have an SDR, either outsource it to a outsource SDR company like mine or somebody else's or you have that organization to start doing that. So they're generating awareness, marketing general awareness, and then they're doing that lead nurturing, but someone has to stand then do the outreach Meyer has, is a phone first.
Organization, but a lot of companies are doing heavy on the email outreach and lighter on the phone. Yeah. Heavier on the social or a mixture, the omni-channel approach. So there's a lot of changes going on a lot of dynamics happening in the Outback.
[00:06:43] Tyler: Yeah, for sure. I've seen more and more companies. It used to be phone first that are going to more of an omni-channel or phone second or third, just kind of depends on the situation.
Interesting. You bring up that most companies would invest in ahead of marketing initially at that growth stage and our startup stage. And then. The sales would be typically founder led. When do you think, is that inflection point where sales should go from being founder led to the founder could obviously still be involved, but there needs to be more of an infrastructure put around hiring another sales leader or hiring a senior AAE to come in and potentially lead the organization.
Eventually. What does that inflection point typically look like in the companies, these growth stage companies you work with? That's
[00:07:25] Mike Farrell: a great question, but it's hard to define it. I believe they know it when they feel it right. Clearly they get to the point where the founder can't do everything and we're wearing many hats initially.
And then starting to parse off those who take those hats off and hire the talent to focus on a full-time. But clearly, like you said, when you got a product market fit and you have to hit the gas, you have to have a sales professional. Leader. Cause at that point you're probably going to have some additional funding.
You're going to be able to go out and get that staff in the scale, the staff. Yeah. So that is the infrastructure around the sales staff, not just the SDR organization. So you have marketing scaling, you have account executive sales, staff, scaling and closers. And you've got the prospecting engine all working
[00:08:13] Tyler: together.
Exactly. Ideally working in alignment. Marketing and sales alignment and sales development sitting in the middle of those organizations, making sure things go smoothly on that handoff process. It's easy to say, oh, we need to be aligned. But companies miss on that. Where do you see companies falling short in that marketing sales dev sales alignment?
Where do you see that process breaking down? More often than not, there
[00:08:36] Mike Farrell: can definitely be a contention on who owns the SDR function. Is it owned by the sales leader or is owned by the marketing leader? If the marketing leader is the first one in, they typically own that function because they're generating the leads that have to be followed up on.
And then when the sales leaders brought in, then there should be. Turf battle. Go on there. As long as the sales leader coming in, they've got to build an organization. They've got to scale. Obviously the chief revenue officer, that title didn't exist 10 years ago, 10 or 15 years ago, but that's supposed to be the person that ties in sales and marketing and even customer success into that single leader.
So there's no. Finger pointing and really tie it all together. So that would be that whenever that point happens, maybe it's just as a VP of sales initially, or a couple of senior sales executive, and that's how you start the sales organization. And then eventually it's a CRO. If they've gone right to a CMO, do you go right to a
[00:09:26] Tyler: CRO, right.
In your opinion, do you think that there is that. Sales hire, let's say you are a founder led sales team, and you're a team of one. The founder has been wearing many hats and also leading the sales organization like most founders do. And that you're making that first sales hire. Should it be an SDR? Should it be an IE?
Should it be. A VP of sales or a CRO. Do you need the leader in place first or do you need to hire multiple people at the same time? What do you see works best when you're adding to that founder led sales team of
[00:09:53] Mike Farrell: one? Let the answer, I think it depends on how much from a venture funding standpoint, are you a B round?
How much capital do you have? If you have the capital you're going from a founder. Led sales. You go out and get a CRO with a team of say three or four or five. And start if it's like, okay, we got product market fit. It's a land grab. We got to go, got to go fast. Then you build that sales team. And then you would initially you would outsource SDR.
Maybe you already have a couple of SDRs and you need to scale it. Where are you putting your investment dollars? It's not just investment of dollars, the investment of time and energy. All the people that have to do this work again, that opportunity costs you go out and hire some agencies to help you in that journey.
Pumping the opportunities into the end. Obviously marketing is pumping leads in to typically what I see is internalists the organizations are really good at following up. Marketing leads needs generated by marketing. They're less focused and let's face it. It's harder to cold call
[00:10:58] Tyler: versus following up.
So you see internal teams are better at following up quickly with the marketing leads with inbound leads. They're not as good at doing outbound themselves. That's my experience. Yeah. Why do you think that is
[00:11:08] Mike Farrell: Mike? It depends on the culture of the company too. And how that is built out, whether it's a company's using SalesLoft or outreach, we use front spin, a similar front spin is more phone-based as the email and texting functionality as well, but SalesLoft and outreach are more email centric.
So it depends on the culture of the business. And I think that's what I've seen. Most inside of groups that are built inside. There's. Marketing leads to follow up on to keep them busy. Right? But you still need sales guys. The sales guy will say we don't have enough pipeline.
[00:11:46] Tyler: I don't think a sales has ever said I've got too much pipeline.
I got too much. I don't want to overdo quota too much. I don't think I've ever heard that.
[00:11:53] Mike Farrell: I'm a big fan of HubSpot. We're a HubSpot user. So the HubSpot thing is inbound driving by late. But you know, you still gotta go. Right. You got to do both. Yeah. There's no one silver boat. You got to do both.
[00:12:05] Tyler: Exactly.
And it sounds like it depends. Should you insource or outsource sales development? Who should you hire? First? Depends on it. That product market fit. How much traction do you already have? How far down the hill is the ball already rolling and is marketing already generating some of those inbound leads because that might dictate who should you bring on and who should be that next tire after the founder?
Because if there's not a lot of leads, you might need to go outbound and you might need to do it quickly. Or if there is a lot of inbound, maybe that does impact that decision. What do you think there, Mike? Does it depend on the level of inbound you have coming in? Is that really one of the key data points that you should consider?
As to how you should build out your sales
[00:12:41] Mike Farrell: org. Yeah. Clearly that's one data point, but then what's the average deal size. What's the contract value. That's an economic indicator that do you need 500 new clients to hit your sales goal? Quarterly annually, wherever you are, or do you need 50? I'm a metrics guy.
Give me the KPIs. What are the goals? I'll work backwards. Yep, exactly. What are the sales goals? We have to close this much. All right. So we need to have this much in pipeline. What's our conversion rate from pipe to close, and then I need this many deals in pipeline. Okay. Well then how many appointments do I need to create that many deals?
It's all a cascade. You can work backwards from your goal. So it just works all the way back. You can figure out how many sales reps you need, how many SDRs you need, what kind of leads, what kind of activity needed on the marketing side? It could just, and if marketing's generating 50% of it, yep, good. That means you have to fill the gap of the other 50%.
How are you going to do that? Is that going to be outbound? And do you have to engage with another firm or can you scale up your SDR team to fill that
[00:13:45] Tyler: gap? And how quickly can you.
[00:13:47] Mike Farrell: I've seen SDL organizations where there's an SDR organization that just does marketing leads and then there's one that does outbound.
Yeah.
[00:13:56] Tyler: That makes sense. What other words of advice would you have for these revenue leaders? These founders who are trying to think about some of these things and building out a sales development organization, any other words of advice you'd have for those folks
[00:14:07] Mike Farrell: to build it from scratch? It's tough.
There's going to be turnover. There's going to be bumps in the road. Don't short invest on training. No. What your profile is? Do you want to go get experienced people or do you want to go get the college grads? If you get the college grads, that can be a great minor league system for you and your AEC team.
You got to look at it in the long run. You got to take the long view, but you have to invest in those people. You gotta invest that training of those folks or get a good training partner to do that. Right. There's some great training firms out there that will do that. Yep. You have to make those decisions early on.
What's that profile. And then knowing what your inbound leads are. Is that going to be enough to hit our goals, that the board is setting? Where are you going to fill that gap? Those are some in that time, don't forget opportunity costs. I'm a firm believer in building in-house and auditing. Or augmenting with an outside firm or starting with an outside firm while you build it
[00:15:01] Tyler: into that makes sense, Mike, if my listeners want to find out more about you online, how can they do
[00:15:05] Mike Farrell: so?
Green leads.com. They can hit me up on LinkedIn or emails. Mike Farrow, F a R R E L L F Mike dot Farel F a R R E L l@greenleads.com. Perfect.
[00:15:18] Tyler: We'll link all those links in the show notes. Mike, appreciate you coming on. Thanks so much. All right.
[00:15:23] Mike Farrell: Great. Thank you.
[00:15:28] Tyler: Thank you so much for listening to today's show. You can find all the links discussed
[00:15:32] Mike Farrell: and the show notes@thesaleslift.com.
[00:15:36] Tyler: That's
[00:15:36] Mike Farrell: the T H E
[00:15:38] Tyler: sales, S a L
[00:15:40] Mike Farrell: E S.
[00:15:41] Tyler: Lift L I F t.com have questions for me. Email me@tyleratthesaleslift.com. We look forward to seeing you back here next week, and we hope today's show brings you the sales lift.
Your business needs. Remember ideas. Plus action equals. You've got new ideas. Now
[00:16:02] Mike Farrell: it's time to take action
[00:16:04] Tyler: and the results
[00:16:05] Mike Farrell: will follow. See you next time. .