Quotas are not a new idea to sales. In fact, Professor of Business at Harvard, Doug J. Chung, notes that “some of the basic theories [of sales force compensation] established in the 1970s and 1980s still apply.”
While there have been some updates since the ’80s, setting quotas for your reps can still feel overwhelming. The combination of “art and science,” as many people refer to it, sounds like black magic. How are you supposed to stir up the perfect potion?
Well, that’s the bewitching question. Different approaches work for different teams. Getting a complete view of your options may help in the process. So, let’s break down the types of quotas used today and how to motivate your team as a successful sales operation leader.
5 Basic Types of Sales Quotas for Your Sales Team
Basic Revenue Sales Quota: Sales reps target a certain amount of revenue in a specific time frame and produce an outlined revenue number. This type of quota is the most common, and you are likely familiar with it.
Forecast Revenue Quota: A forecast quota uses historical information and past analytics across various metrics to inform future sales productivity. Forecast quotas usually start at the leadership level, looking at the organization’s revenue goals from the top down. Once you have a number, you can disseminate it to your sales managers to utilize their reps according to their talents and capabilities.
Activity Quota: An activity quota is set based upon a certain number of sales activities they complete during a specified period—for instance, a particular number of phone calls, follow-up emails, and demos.
Volume Quota: Sales reps are responsible for selling a certain number of units or revenue generated to meet the goal. The purpose is to incentivize sales reps to sell more units to move a certain amount of inventory within a predetermined timeframe.
Account Opportunity-Driven Quotas: These quotas consider variations in the market as well as account characteristics. By looking at revenue retention, permeation, and new customer acquisition, leaders can set goals based on the whitespace in key accounts.
Using the Right Data for Sales Ops Leaders to Set Quotas
Many times, leaders will use historical sales data from their organization. They may look at last years’ sales and bump it up a little to encourage growth. They may look a little deeper into lost sales, and if feeling positive, may add those back to the pipeline. However, this could be setting you up for failure.
If you want to identify all available revenue correctly, you have to dig 6 feet deeper. Of course, you should look at the numbers your organization has produced in the past. This process does help inform how much you know your team can and has sold. However, it doesn’t tell you what the future holds.
You need to identify how many companies are potentially looking for a solution such as yours. Where those companies may be in the buyers’ journey. And how much wallet share is a legitimate target. You’ll want to consult research tools like Zoominfo and Google Finance to learn what kind of opportunities are available. Leveraging a technology platform such as Revegy can help simplify the most pertinent information through strategy maps, relationship maps, scorecards, and more.
Involve Your Reps in Setting Sales Quotas
After doing all that boring math and getting a general idea of company goals and individual goals, it’s time to distribute the plan. First, let your sales managers know what your vision is, and then allow them to get buy-in from their reps.
By involving the reps before the start of the period, they will move forward feeling educated and more comfortable with their set of expectations. They can also be encouraged to have a say in their expectations. By giving them that opportunity, you may avoid sandbagging or roadblocks in the future.
If sales leaders are willing to negotiate with their reps, reps may help with an accurate forecast in the long run. Why? Because people know themselves. Give them a chance to set goals with their manager rather than be fed numbers they may feel have no bearing.
In conclusion, decide which type of quotas work for your organization. It may very well be a combination based on your teams’ capabilities. Do the research to ensure healthy productivity and positive job morale. And give your reps a chance to be involved. These processes can set your people up for the success you want need them to have.