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The Cost of Startup Lead Gen in 2020 & Beyond

As an outbound-focused startup, your sales process will determine whether your business succeeds or fails, and a huge part of that comes down to how you structure your lead generation process.

With so many lead gen options to choose from, how do you decide whether to hire internal SDRs, outsource your lead gen, or use lead gen automation software?

The decision comes down to just two things: cost and performance.

The true costs of hiring in-house Sales Development Reps

If your BDRs are spending too much time building lead lists and updating CRM entries, you might consider hiring a dedicated SDR to take this work off their hands.

This will help you maintain clean data, coordinate your sales efforts, and allow your sales reps to focus on selling. Here’s what it’ll cost you annually per SDR hire.

Salary, benefits & commission
$50k - 80k (depending on location and experience)
Employer taxes
$3k - 6k
Cost of hiring
$4k - 16k (including hiring time a 34% turnover rate)
Sales software and lead data
$1k - 15k per SDR (depending on your suite of tools)
Training
$3k - 10k per SDR
TOTAL
$60k - 125k per year ($92k median)


On top of those costs, you also have to consider that building your own internal team is a slow process, so it’ll take time to get your sales engine running… plus a lot of involvement from your leadership team.

And perhaps the most compelling argument against hiring internally is that the average SDR quits after 14 months, so it probably won’t be a once-and-done process.

But, internal SDRs do give you the most control over the quality of your leads, so you’ll have to carefully consider whether it’s worth the investment.

The costs of outsourcing lead gen to an agency or freelancers

Outsourcing your lead gen gives you immediate access to SDRs that presumably have experience generating leads, who can begin prospecting immediately.

It also has the added benefit of eliminating internal training and admin, reducing your software and lead data costs, and giving you the flexibility to ramp up or down on demand.

But lead quality varies heavily between different lead generation agencies and different freelancers on sites like Upwork, which is why their pricing can range as follows, with several different pricing formats.

Cost per lead
$0.50 - $50
Cost per appointment
$20 - $500
Cost per month
$2 - 20k per month ($24 - 240k annually)


Depending on which agency or freelancer you choose, outsourcing lead gen could be a cheaper option than hiring, or it could be more expensive. So, ultimately, the decision of whether or not to outsource lead generation comes down to performance.

And, unfortunately, because pricing and performance vary so significantly, there’s no way to know which option will end up bringing a higher ROI without running the experiments yourself.

The costs and benefits of “up and coming” lead gen automation

Lead generation software has been around for a while, but 2019 has seen the rise of a new type of lead gen platform.

Rather than simply giving you access to a searchable lead database, these new platforms actually automate a lot of the work that has traditionally been done by SDRs — so they can potentially save you from the burdens of hiring, management, training, and churn.

If you’re a startup that’s nailed down your ideal customer profile, it’s now possible to plug your ICP into these lead gen platforms (based on company size, industry, contact role, and other variables) and have the platform automatically and continuously source contacts that match your lead criteria.

Your leads are then de-duplicated against your CRM and synced with your email outreach software to automate most work that an SDR would do.

Pricing for these lead gen automation platforms ranges from $3k - $30k per year and you can check out our Quick And Dirty Buyers Guide To B2B Lead Data Providers here for all the ins and outs.

Since these new platforms come at a fraction of the cost of hiring and SDR or outsourcing to an agency, they could be well worth experimenting with, especially in the early stages.

Run experiments to find the right solution for your business

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Since lead gen automation software is the most cost-effective, flexible, and low-touch option of the three, it might be a good initial experiment for startups who are still developing their sales process.

With the right tech stack, you can quickly and cheaply test different messaging with different audiences to help you nail down your ICP before you hit the scale button and start hiring.

If you’re sold on the internal SDR option, you might consider hiring an intern in the early stages to save some cash, and perhaps give them more of an analytics role that improves your sales process while allowing your lead gen software to do the gruntwork.

Whichever option you choose, be sure to take all of the costs into account and distil those numbers into a single “Cost Per Lead” that lets you truly compare which option is right for you.

 
In-house SDR
Outsourcing
Automation
Cost 
$60k-125k per year $20k-240k per year $3k-30k per year
Speed
Slow Fast Medium
Internal resource requirements
Heavy Light Medium
Results
Depends Depends Depends
Best for 
Enterprise Mid-Market Early-stage / SMB
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