Justin Michael has an active Linkedin poll entitled, “Why are SDRs systemically underpaid?” Voters are somewhat evenly split among the available answers: revenue isn’t actually there; AEs win in the predictable revenue model; bias against youth; and, greed.
But, I’d argue that SDRs are not systemically underpaid. Women are *systemically* underpaid; according to the Pew Research Center, one-in-four women said they had earned less than a man who was doing the same job contributing in part to a 16% wage gap. Pay gaps exist for black people (13%), Hispanic people (9%), and too many other groups.
It is unpopular to say that SDRs are underpaid since SDRs are a key component of the revenue engine in many companies (SaaS or otherwise). We give SDRs kudos because their job is a grind. However, one need only watch a few episodes of Dirty Jobs to know that pay is mostly uncorrelated with hard work. This is as true in office-jobs as it is in retail or manual labor jobs.
There is an open, mostly transparent, two-sided market for SDRs with many employers and many workers. In such a market, there are floors and ceilings for compensation that govern supply and demand.
Let’s start with a ceiling referenced in Justin’s post (albeit with some more typical numbers.) Assume an outbound SDR generates 8 qualified opportunities at month with a win rate of 20% and a $40K annual contract value. This means they source $768K of closed won business. Companies need to sell and service their accounts, develop new products, and generate a competitive return on invested capital for stakeholders. On the high end, this leaves around 15%, or $115K per SDR. Few SDRs earn anything like that but stay with me since that is a value-based ceiling.
Turning to the floor on compensation, even though the SDR job is more monotonous than an AE job, the SDR function is a lower-skilled function. Not low-skilled, lower-skilled. Before you argue with me, note that the typical SDR identifies and engages contacts in order to schedule discovery meetings. Most AEs do that *and* they manage opportunities to close. Many upsell, cross-sell, and renew as well. Since few products sell themselves, AEs must bring to bear advanced skills in persuasion, project management, negotiation, etc.
Accepting the SDR function as lower-skilled, employers are able to hire early career professional (often individuals with zero work experience) to be SDRs. There is simply a much larger pool of people at any given time who are qualified to be SDRs than to be AEs. The ‘clearing price’ in the labor market for SDRs has been moving upward over time but that is more because of alternative jobs available to this population of workers than due to the value they create. If anything, the actual value outbound SDRs are capable of creating has been moving down over time as prospects become less responsive to all forms of communication. These days, the floor is around $50K for a person with SDR-esque traits.
Bringing things full circle, I feel that none of the reasons in Justin’s poll explains why SDRs are paid what they are paid. The reason is that $60K-$80K matches supply and demand for the type of labor capable of executing the SDR role as currently defined.
The SDR role exists due to labor arbitrage and labor specialization. Having SDRs prospect (assuming comparable down-funnel outcomes) is as much as 50% cheaper than having AEs prospect. In addition, an AE who spends 50% of their engaged selling time prospecting would probably generate 2-3 opportunities per month, not 4 as would an average SDR, simply due to the inefficiency of context switching. But, this benefit is partly offset due to ‘breakage’ in SDR-to-AE handoffs.
Coming back out the weeds, the net-net is that companies will re-integrate the SDR and AE roles if SDR pay approaches that of AE pay.
In closing, I respect SDRs and I respect SDRs. I’m also realistic about why they are paid what they are paid. They are not systemically underpaid. They earn a market-clearing wage as well as healthcare and other benefits. In addition, they are paid with training/experience (even if just ‘on-the-job’) that opens the door to much higher paid jobs as AEs, sales managers, and for a select few, Chief Revenue Officers and CEOs.