Sales quota tells your sales reps what they need to achieve, motivates them to perform the best, and shows them if they’re making progress.
In this article, let’s take a closer look at sales quota, how to calculate it, and how you can retain it.
Sales quota definition
According to Gartner, a sales quota refers to the performance expectation that sellers must achieve during a set time period (daily, weekly, monthly, or quarterly) to earn their target incentive pay.
Sales quotas are also called sales goals or targets set for an individual rep, a sales team, or a particular region.
Types of Sales Quota
There are four common types of sales quote as described below:
This is the most widely-used sales quota type. Sales reps with a revenue quota are expected to generate a certain amount of revenue over a predetermined period.
The quota is set based on sales activities, such as phone calls, meeting appointments, product demos, email follow-ups, and proposal submissions.
Sales performance is evaluated based on the number of products sold, the number of free trial users, or the number of paid users.
More than one quota is used to measure sales reps’ performance. For example, a combination of revenue quota and volume quota or revenue quota and activity quota.
Sales Quota Objectives
Setting sales quotas brings a lot of benefits to your sales team and your business. Typically, it helps:
- Monitor your sales reps’ activities and performance at every stage of your sales process, from prospecting to closing deals.
- Keep your sales reps motivated and accountable.
- Reveal challenges or weaknesses in the sales pipelines that prevent your reps from achieving their targets. For example, is it because your quota isn’t feasible?
- Or do your reps need more resources to enhance performance?
- Identify high-performing sales reps and replicate their sales techniques.
- Support in developing more accurate sales forecasts and sales compensation plans.
Sales Quota Calculator
To create sales quotas, first, you need to determine your baseline. A baseline is the minimum amount of revenue or number of customers you need to generate to stay in business.
You can look at your historical sales by month and year, then consider other factors like market influences and seasonal variations to find your baseline.
After that, you can apply the top-down or bottom-up approach to calculate your sales quota:
- Top-down: You develop sales goals based on your business’s objectives and what you expect your reps to achieve. Following this approach may not be a good strategy as your quotas can be unrealistic.
- Bottom-up: Sales goals are set based on reps’ capabilities and historical data. This is the most common method to calculate sales quotas.
How to Set a Sales Quota
Follow these steps to set sales quotas:
Step 1: Review your current sales performance.
Do your sales reps achieve their goals? How many of them have hit their targets? Do you receive complaints about unrealistic goals? Answering these questions will tell you about what you need to pay more attention to when setting new quotas.
Step 2: Involve relevant stakeholders, including finance management, sales leaders, and your sales reps.
Doing this allows you to leverage everyone’s expertise and experience in developing well-thought-out and articulated sales quotas.
Step 3: Communicate sales quotas with each of your sales reps.
Clarify what you expect them to achieve, how you’ll measure their performance, and what their compensation looks like.
Quota Attainment Challenges
Quota attainment refers to whether your sales reps achieve their sales quotas or not. The reasons are many, but most of the time, it’s because:
- Your sales reps won’t have enough opportunities.
- Your sales process is inefficient and ineffective.
- Your sales reps fail to communicate value and negotiate with leads.
While these challenges are common and inevitable, there are ways you can use to avoid them and improve quota attainment.
How to Improve Sales Quota Attainment
There is no one-size-fits-all solution to attain quota — the formula depends on your business and your sales reps. That said, you can apply the following tips:
- Align performance goals and metrics with sales roles as different roles are responsible for different sales activities. If your sales rep is in charge of the prospecting stage, their quota should be the number of leads, not revenue.
- Improve your sales pipeline as it shows your sales reps where opportunities are, which deals are at risk, and what action they need to take at a particular time.
- Develop a list of KPIs to keep track of your sales quotas. Qualified leads, opportunities, win rates, and sales are typical KPIs you should consider.
- Provide sales coaching and training to help your sales reps improve their skill sets.
- Deploy a tool that gives you a visual, data-driven view of your sales performance in real-time. This way, you can know exactly who has made their quotas and who hasn’t to provide immediate solutions.
At Revenue Grid, we develop revenue intelligence solutions that help you control and improve sales quota attainment. It provides you with visuals and dashboards to view clear stats without having to run through calculations. But Revenue Grid’s actual powers are more than that.
For example, our sales forecasting tool uses artificial intelligence (AI) that allows you to precisely predict revenue based on your historical data, trends, and market changes. It also gives your reps AI-based insights so they can change their strategies early to avoid mistakes and risks.
Apart from that, Revenue Grid offers you pipeline visibility and pipeline health check tools to measure your pipeline’s performance. You can have a detailed view of your reps’ activities, what they’ve done, how many opportunities they have, and what you can do to help them hit their quotas.