The U.S. economy is strong and small businesses are doing well. But according to the inaugural “2019 State of SMB Finance Report” from ScaleFactor, 52% of the businesses in the survey didn’t hire any new employees in the past 12 months.
The survey includes results from 500 principal decision makers from U.S. based SMBs. Business is already looking good in 2019 for this group - 96% say they are seeing stable or growing revenue numbers in 2019 compared to last year.
So what’s the issue? Why aren’t they hiring?
Repeat after us: higher revenue does not mean an organization must expand or make new hires.
There are so many scale-empowering tools and services in today’s outsourced-fueled and tech economy that alleviate the high-dollar headcount and overhead burden for SMBs that aren’t at the size or run-rate that allow for responsible economic investment in hiring.
But we’re getting excited - we will get to that in a second.
The report found that the biggest impediments to hiring included:
- Salary Costs (18% of respondents)
- Skills Shortage (13%)
- Healthcare / Benefits Costs (10%)
- Competitive Labor Market (4%)
While the report findings continue and focus mainly on finance technology and back-office accounting data, the fact remains that this is another recent example of how more small to medium-sized businesses are trading hiring for the outsourcing (and automating) of labor-intensive services to stay focused on customer experience, adoption of new technology to improve operations, and putting more money back into the bottom line.
Continue to Make Zero Sales Development Hires in 2019
When we saw this report, of course we were like, “YES! We know! We could have guessed these results!” In fact, if you were to survey our customers, the percentages might be even higher when it comes to the biggest impediments to hiring.
We haven’t been shy about it - we won’t shut up about why we think SMBs, SMEs, and startups should seriously consider NOT hiring specifically a sales development team. Or ANY team for that matter that, when taking a serious look at the internal cost considerations we share below, and compares them to instead an outsourced service provider, sees a negative ROI.
Using the SDR role as an example, here are four cost factors for you to weigh:
Weigh Salary & Other Personnel Costs
- The base salary of a single SDR equates to only about 40% of the true cost of that one employee.
- Consider training, on-boarding, and software costs for each new hire as a key line item for your in-house build budget as well as the management salaries that will run each of these programs for you.
- Then compare these costs to the size of team, level of expertise, and access to technology that you get using an outsourced agency - and at what fraction of a price.
- There are at least six additional costs that you need to calculate into a single hire’s true value - we share those in this guide.
Assess the Cost & Functionality of Sales-Enablement Software
Software is a big part of sales development. Your reps will need a powerful CRM, as well as other tools like LinkedIn Sales Navigator, an Outreach tool, an email validation tool, business email accounts, and more. Those costs add up fast. Here are examples of some of the annual fees you might pay for sales software:
- Hubspot: $14K+ (10 users)
- InfusionSoft: $3500+ (10K contacts)
- SAP: up to $1400+ (per user)
- Salesforce: up to $3500+ (per user)
- LinkedIn Sales Navigator: $1100+ (per user)
- Outreach: $1200 (per user)
You might use three of these tools, as well as G Suite, ZeroBounce, cloud storage, and more. But even streamlining your choices, the costs will continue to add up, especially when you start scaling beyond a very small team.
And don’t forget the costs of implementation or training, which may be necessary for complicated systems (there are organizations that offer Salesforce training for $250 per employee).
Combining those software costs with the high turnover of an in-house sales development team drives the cost up even further.
Calculate the Cost of Data
- What is your solution for filing your pipeline with qualified leads? Are you going to take SDRs away from outbound outreach and prospecting to research and find leads...at scale?
- Have you considered the cost of hiring a researcher? It’s around $50,000 base salary plus the other costs mentioned above.
- Or will you be subscribing to lead databases and risk flooding your CRM with data-decayed contact info?
- We give you the costs for each of these options and the advantages and disadvantages for each in our guide.
Understand the Hidden Costs of Hiring, Ramping, and Managing
Hiring is a resource-intensive process. You need to create job posts, interview candidates, and negotiate salaries with a constant stream of sales team members. It takes a lot of time and money. In fact, according to Glassdoor, you’ll spend an average of $4,000 per new hire.
But those are just the HR costs. If a rep doesn’t have much experience, you’ll also need to invest in getting them up to speed.
Almost 75% of high-growth companies hire sales reps with a year of experience or less. And it takes an average sales rep three months to ramp up to full quota.
That doesn’t sound so bad until you realize the average SDR tenure is only 14.2 months. So you’re putting in all that work for 11 months of full-quota sales. And then you need to start again with a new hire. You also take a risk on each new hire. Not every sales rep is going to fit in well with your company culture. And a bad fit can mean an even shorter tenure.
Outsourced reps are already prepared to ramp up as quickly as possible –– usually, it takes less than a month before the SDRs are launching campaigns. And the hiring is taken care of for you.
Hire No One, Hire Some, Or Outsource - It’s Up to You
It’s the early hours of your business. We get it...we know you want to build a culture and community too through hiring. The question of whether hiring in-house or outsourcing your sales development (or any other role for that matter) is a personal one. What’s right for another business may not be right for you.
If you do choose outsourcing, the level of outsourced commitment is totally up to you. It depends on what’s right for your company and the structure you have in place. We’ve observed that 35% of companies that choose sales development outsourcing with us typically use a combination of an in-house sales and/or marketing team with our services.
SMBs come in all different shapes and sizes and are walking at many different points along the path to growth. But there is one universal truth for every B2B company that we know: more meetings = more sales. How you get those meetings –– and the people you choose to hire to get those meetings while keeping profit margins high at the same time –– is up to you.