Businesses that don't grow will gradually drift into irrelevance as their competitors take up market share. A growing business is exciting with future upsides which are sometimes more important than immediate profits. Amazon is a prime example of such a business where it prioritizes revenue growth over profit per shares.
Most businesses depend on sales development reps (SDRs) to drive sales. One of the ways to grow your sales and revenue is to hire more SDRs. More SDRs means more potential opportunities and more sales. So why can't companies simply drive their growth by hiring more and more SDRs? There are several factors that a company needs to consider before they rely on hiring as the strategy for growth.
Factors to consider before hiring
In any business, cash flow is critical to sustaining the operation. Regardless of how profitable a company is, the company will go out of business when it runs out of cash. Prior to hiring more SDRs, a sales operation must consider how hiring impacts the company's cash flow and whether it's worth the tradeoffs.
1. Short-term cash flow dip for long-term growth
When hiring a new SDR, there is an immediate expense on salary before the SDR can contribute to the business growth. Any new SDR is likely not effective and may take time and training to learn about the company's product and operations. A business runs the risk of having a new SDR burning bridges and taking time away from other SDRs.
An effective sales operation must know the time it takes a sales rep to break even and start contributing to the business's bottom line. Can the business take the short-term dip in cash flow and sales performance for the long-term growth?
2. Risk of headcounts
Ideally, companies would like to hire more SDRs and grow indefinitely. However, companies must take the long-term perspective of business sustainability and prepare for downtime when unexpected and/or uncontrolled events happen in the business's ecosystem. When the economy contracts and prospects slow or stop buying, having more headcounts reduces the company's cash flow and therefore reduces the company's flexibility to navigate through the downtime. While hiring to grow in a good time is great, a company must not lose its long-term perspective and stretch itself too thin of cash flow.
3. The ROI with each additional SDR
Considering the risk in cash flow, a sales operation must consider the incremental benefits of hiring each additional SDR. Most businesses work on a limited number of potential prospects within an addressable market. Therefore, at some point in the business's life cycle, it will begin to see reducing effectiveness in each additional SDR it hires. Your sales operation must consider when the ROI of hiring is too low to justify the risk in cash flow.
For example, is there an alternative to the better use of cash flow than hiring an additional SDR? Rather than hiring more SDRs, can you use the money to improve the efficiency and performance of your current SDRs and achieve better results?
Or, is there a way to improve the ROI of each additional SDR? Perhaps an improvement in your sales machine or reducing the SDR onboarding time can significantly improve the ROI of hiring an additional SDR. You may want to consider addressing issues within your sales operation before you considering hiring more.
Because there is an intrinsic risk in hiring more SDRs, companies should not rely on hiring as the sole growth strategy. Finding ways to help your current SDRs to do more, faster, and/or better is a better strategy for long-term sustainability and competitiveness.