The consistent success of a sales team is reliant on achieving quotas. A sales quota is a specified sales objective within a certain time period — they can be used for entire teams, regional reps, and individual sellers. Sales quotas differ from sales goals in that quotas are typically smaller objectives that feed into the company’s overall sales targets. This article will discuss how to set sales quotas and ensure that your reps regularly reach their numbers.
Importance of setting sales quotas
Establishing quotas for your reps is an imperative step towards building a successful sales organization. Here are a few reasons why you should be setting sales quotas:
Sets benchmarks for performance
Quotas give you insights into potentially problematic areas within the sales cycle — they can also pinpoint where your reps may be underperforming or struggling.
Clear expectations for the performance of reps
With set quotas, your reps have distinct and time-specific goals, which means they have upfront clarity into what is expected of them. This standardized form of measurement also helps with their skill growth and development.
Creates a more productive and profitable sales team
Having individual and team quotas helps drive motivation and friendly competition, which leads to a more efficient and effective selling team.
How to set sales quotas
Based on a recent Sales Performance Study by CSO Insights, only 54% of salespeople are making or exceeding their set quotas. When calculating your quotas, you need to be sure you are establishing achievable and accurate numbers— otherwise, you won’t be setting up your reps for success. Here are some helpful tips for setting quotas:
Steps for setting accurate sales quotas
1. Pull your data
When determining your quota numbers, the best place to start is with your data. Creating quotas through data-driven insights will lead to a greater chance of consistent goal attainability by your reps.
Utilize all of your internal resources and software to collect these numbers. This can include your CRM, forecasting software, reporting programs, and any other tools that can seamlessly and accurately extract historical sales information.
With the data collected, use a combination of bottom-up and top-down approaches to arrive at a feasible middle ground. Use the past sales numbers of your team and individuals to determine future performance numbers. Then, incorporate the company’s expected growth to project potential gains.
Don’t forget to also collect marketplace data — this gives you additional acumen into your specific industry, which allows you to incorporate the future demand for your product. All of this sales data will give you a solid foundation for setting your quotas.
2. Choose your type of sales quota
Once you gather all of your information, you can decide on your quota strategy, meaning how you would like to measure your quotas. This can be based on a variety of factors like the style of a sales rep, your industry, and the number of products your reps are responsible for selling.
Here are some of the most common examples of sales quotas:
Volume quotas are based on the number of products or units sold during a certain period of time.
Example: Let’s say you have a car sales rep and you set their Q1 quota at 15 cars. This means they will need to sell 15 cars within those three months to successfully hit their quota.
Best suited for:
- Businesses with short sales cycles
- If your main goal is increasing overall top-line revenue
Activity-based quotas are used to measure specific outreach actions like a set number of emails, phone calls, and booked meetings.
Example: You assign your sales rep an activity quota of 50 phone calls and 10 meetings per month. To reach those quotas each month, they are responsible for tracking their daily outreach activity.
Best suited for:
- Reps that don’t directly close sales, so Sales Development Reps (SDRs) and
- Business Development Reps (BDRs).
- Businesses with longer sales cycles that include multiple stages
A revenue quota focuses on the total amount of money earned from sales over a certain period of time. A profit quota is based on the amount of profit from closed sales.
Example: Let’s say you set your car sales rep’s Q2 profit quota at $100,000. They sell 15 cars at $10,000 each, but each sale costs the company $2,000. Their total profit for Q2 would be $120,000, which would bring them in above their quota.
Best suited for:
- Businesses that sell multiple services at different price points
A forecast quota is determined by past sales data and the company’s expected growth — this includes data from the marketplace, the region, and the individual sales rep’s past performance.
Example: Let’s say your US sales rep earned $10,000 in Q1 and wants to increase their revenue by 5% in Q2. Based on their past performance plus current pipeline opportunities, you foresee Q2 being on par with Q1. Therefore, their total Q2 forecast quota would be $10,500 — the original $10,000 plus the 5% growth.
Best suited for:
- Generally used with regional/territory-specific sales reps
A combination quota typically combines more than one style of quota measurement. This can depend on factors like product type, internal structures, and the length of the sales cycle.
Example: A sales rep at your company is responsible for both prospect outreach and closing deals, so you set their individual Q1 quota at 100 phone calls, 80 follow-up emails, 20 demos, and $5,000 in closed sales. In this case, your rep is assigned activity and a profit-based quota for Q1.
Best suited for:
- Sales reps that have multiple responsibilities within their role
- Businesses with long sales cycles since there are more opportunities to track
- success aside from overall revenue.
3. Choose the time frame
After choosing your type of quota, you will want to determine the time frame for these objectives. For example, are you setting these quotas monthly, quarterly, yearly, or a combination?
You will also want to determine how often you will check these quotas and adjust them accordingly. Will you be setting new ones each time period? How fluid do you want to make them? This is entirely dependent on the structure of your organization.
Deciding these factors upfront will set a clear path for you and your sales reps — in turn, creating a more transparent flow of expectations and communication.
4. Find your baseline
The baseline is the minimum amount of sales you’ll need to remain in business. Knowing this number creates a helpful foundation when setting your quotas — and ensuring they are realistic and attainable. If you set your quotas too high, then your reps are less likely to reach them consistently. If you set them too low, then you may not even hit the baseline minimum.
Use your historical data, any seasonal or territorial factors, and expected growth information to find the minimum number you’ll need to hit each month. By determining your baseline, you can build your quotas with more efficiency and awareness.
One of the most important steps is documenting and communicating the quotas with your team. Consistently refer to these numbers in your 1:1 meetings with your reps. Use a centralized dashboard so reps can have clear visibility and real-time access to their quota expectations.
Reps need to know their quotas for each period and how these numbers are being determined. Thoroughly discussing their quotas means there is less room for confusion and miscommunication in the future.
How to ensure your reps reach their sales quotas
Establishing the quota is only the first step — you also need to support your reps in actually obtaining these numbers. Here is how you can help ensure your reps are hitting their quotas:
Utilize multiple forms of metrics to track individual and team quotas automatically and in granular detail. Some examples include:
Your CRM gives you a direct insight into customer trends along with full outreach activity, client history, and prospect data for detailed information on every rep’s performance.
Sales Activity metrics
Track the activity numbers and flow throughout the sales cycle to notice if there are any gaps from initial outreach to conversion. Automation is a helpful tool since it also incorporates conversation and prospect intelligence for deeper knowledge.
Sales Pipeline metrics
This includes insights into areas where the team may be lacking throughout your sales cycle. This also includes data like opportunity-to-win ratios and conversion rates within each stage of the sales cycle — allowing you to narrow in on a specific team’s performance.
Once you determine the type of quota you want to set for your sales team, you need to remain consistent with tracking performance— noting that quotas will likely need to be reassessed and adjusted over time.
Not all data needs to be in quantitative form. Feedback and awareness through coaching, consistent face-time, and reliable 1:1 conversations allow space for open communication and better guidance.
What if your reps aren’t reaching their sales quotas?
Even when you’ve created a solid foundation for your sales reps, there is always a chance that they still won’t hit their quotas. If that’s the case, it’s necessary to reassess the internal structure and systems that you have in place.
Here are some areas to assess when your reps aren’t reaching their numbers:
Check on their opportunities/quality of leads
A study by ValueSelling Associates and Selling Power found that 69% of B2B Salespeople do not have enough leads in their pipeline to meet their sales quotas.
Check on your pipeline and compare the number of opportunities to the conversion ratio. Are there significant gaps? If so, work with your SDRs and BDRs to see why these leads may be falling short.
Review your ramp-up process
Ask yourself these questions when reassessing your internal onboarding and training structure:
- Are you giving your reps proper training?
- Are they fully prepared for selling your product?
- Do your reps thoroughly comprehend the specifics of your sales cycle?
If any of these areas are lacking, then pinpoint the issue and adjust your process accordingly — invest in training and coaching automation tools to prepare your reps and track performance improvements to ensure the effectiveness of your modifications.
Assess your sales materials
There is a possibility that your sales reps are either not utilizing all of the sales collateral at their disposal or there is not enough content to assist with their sales.
Aside from your individual and team conversations, take a look at your customer engagement metrics — are your customers interacting with your content engagingly? If not, loop in your sales enablement reps and marketing team to create more compelling material that can help your team achieve greater results.