The end of a fiscal year is an interesting time in the sales cycle. With an eye on the previous year’s performance, you’ll have to get back to the drawing board to set a new set of targets for your reps.
This is where it is crucial to understand what sales quota attainment is, and how they can help you take important business decisions.
So, let’s start with the basics.
What is Sales Quota Attainment?
Sales quota is the target that you set for your sales team to achieve within a specific time period, be it monthly, quarterly, or annual.
The measurement of that target is called sales quota attainment.
Looks simple, right? But there’s a lot more to it than just setting targets and measuring them.
Importance of Setting Sales Quotas
From helping you measure the performance of your reps and making them accountable, to giving you a clear picture of the sales process, quotas help you in more than one way.
Here’s why it’s crucial to have a sales quota in place.
Clarity in goal: Being specific on what is expected and by when can clear a lot of roadblocks for your reps. It not only motivates your reps to attain the quota, but can also give them an idea of what they’ve to do to reach their target.
Measuring the performance: Once you set your sales quotas, it gets easier to track where your team actually stands, and what you can do to improve their performance.
Overcoming hurdles: Attaining your sales target isn’t going to be a smooth ride, and hurdles are sure to pop up all through the process. But with a sales quota in place, you’ll be able to figure out where your reps can falter, and deal with the hurdles in a better way.
Staying committed: Achieving the target requires commitment from your reps over a time period, and they don’t have to look anywhere other than the sales quota for it, keeping them motivated throughout the process.
Forecasting Sales: With sales quota, you can easily get an in-depth understanding of the overall sales pipeline, the key sales metrics, and predict what actually your team will be able to accomplish over the given period of time. What’s more, this would help you plan better, thereby working towards your advantage in the process of attaining the quota.
How to Set Up Sales Quota:
Setting up an accurate sales quota is necessary in helping you generate more revenue and accelerate the growth of your organization. You’ve got to set a target that’s challenging yet isn’t overly ambitious which could demotivate your reps.
Here’s how to set up an effective sales quota for your reps:
Choose an Appropriate Sales Quota Strategy:
While there are four major strategies by which you can craft a sales quota, it’s up to you to choose the one that works best for your organization. It majorly depends on the type of industry you’re in, your goals, and the size of your business. Make sure to prepare a checklist of things you’ve to analyze before choosing the appropriate sales quota strategy, for it is what will be used to measure your performance, set baseline, and calculate quota value.
Below are the widely-used sales quota strategies that you can follow in your quota setting process.
- Volume-Based Quota:
A volume-based quota is the number of units sold or the total revenue generated over a specific period of time.
For example, when a sales manager assigns every sales rep a quota of 200 units per quarter, each rep has to reach the assigned sales target of 200 units to attain the quota. To keep the reps motivated, the sales manager may encourage them with a bonus for every additional unit sold.
Another example of volume-based quota is, when a manager sets individual sales quota at $15,000 in total revenue generated per quarter.
This particular strategy would work well for short sales cycles and fixed product pricing. For organizations with longer sales cycles, this isn’t the right one since the result of an action can take some days or months to reflect.
- Activity-based Quota:
When a manager wants a set number of activities to be accomplished by his team members, that’s known as an activity-based quota. The action can be anything like making a particular number of phone calls, attending a set number of customer appointments, etc.
For example, An SDR is assigned a quota of 150 cold calls, 20 emails, and 10 demos every month. These activities will be captured in a CRM, and are useful for teams with multiple sales reps.
Unlike the volume-based quota, this activity-based quota works well for companies with longer sales cycles and multiple customer touch points.
- Profit-based Quota:
A quota that particularly works for companies that serve different segments with a wide range of products, this strategy is based on the salespeople’s sales performance. The primary task for reps here is to sell the product/service with the highest profit margin, and they’re incentivized for doing so. This naturally results in an increase in the sales productivity of the companies.
- Cost-based quota:
When you want to exclusively focus on controlling the expenses, then this quota suits the best to achieve your goal. The cost-based quota can be used in service-based companies where the profit may be directly dependent on the time spent in closing a deal or diagnosing the problem and solving it.
- Combined Strategy:
When more than one quota is assigned by a manager to their salespeople, then it is called a combined strategy. For example, It’s a combined strategy if a manager assigns both volume-based and activity-based quota to a sales rep, with the aim to focus on both quality and quantity in sales strategy.
Choose Your Review Period:
A review period is the time for which the performance is measured. Some general review periods include weekly, monthly and quarterly. While the first two would help the manager to quickly address the problems, the quarterly review period would give the reps ample time to meet their targets. necessary time that the reps would need to make up for the sales that they’ve missed.
Establish a Baseline:
It’s important to define where you stand as an organization, so that you can keep building on it to grow further. A baseline is the minimum amount of sales your company has to make. Make sure that this is decided based on solid data. Some factors to consider are your sales history, seasonality, and market influence.
Calculate Your Sales Quota:
Once you’ve established a baseline, use it to set your sales quota based on the expected growth. For example, if your baseline is $50,000 per month, a 10% growth will give you a sales quota of $55,000 per month.
Check if Your Sales Quota is Achievable:
Make sure that your sales quota is realistic and achievable, and not too ambitious which can break the morale of your reps. An effective sales quota is typically one that is achievable by 80% of your team, and if this isn’t the case, then your sales quota is unrealistic.
Communicate Performance Expectation:
You’ve set up your sales quota. What next? Bringing your team together and making them work towards achieving it. Communicating the performance exception is another crucial step in the quota setting process. Share the sales quota with your team, the rationale behind it, and the KPIs by which you’d measure the performance. Be specific. Also, let your reps be clear about the compensation plans as well. You can also get on a one-on-one meeting with your team members to explain these, and evaluate their feedback and make adjustments to the quota is required.
How to Improve sales quota attainment
The job isn’t over once you’ve set up the sales quota. You should constantly look for ways to improve the process, and remove the bottlenecks that may make life difficult for your reps.
Measure Ongoing Performance: Measure how your team performs currently, and display the result for them to see (You can choose a CRM for this). And then, draw a comparison between the recent performance and the previous ones, so that you can get an idea of where you’ve got it right, and areas you can improve.
Communicate Ongoing Performance: Communicate constantly with your team so that they are constantly updated on what’s happening. While there are a number of ways to do this, what’s important is to communicate to your reps with utmost clarity, and accurate information of the metrics as well.
Assign Sales Territories: Group your prospects based on your product/service, demographic, account type, etc., and assign them to the reps who suit the best for a particular group of prospects.
Automate repetitive tasks: Manual planning process is painstaking. And it’s high time that you adopt a tool that identifies the repetitive tasks, automates it, and makes your job easier.
Motivate with Sales Incentives: Ensure that your reps are paid handsomely, and the incentives are on par with the industry standard.
Avoid These Traps When Setting Sales Quotas
Rear-View Mirror Trap: Set goals by looking at the future, and not by looking in the rear view. Research on your own, understand the possibilities, and then finalize what you’ve to achieve. In this way, your reps don’t have to carry the burden of reaching a target that isn’t reflective of the current market.
The “punishing your best reps” trap: When you have few top performers in your team, the best thing you can do is let them keep doing what they do. You shouldn’t disturb them by raising the quotas. It’s like punishing them for doing their job, and they’ve every reason to feel frustrated.
The “demoralizing your team” trap: By setting the sales quota too high, you give every reason for your team to not feel encouraged to achieve it. In the process, you’ll lose the respect from your team as well. As a leader, your primary job is to make sure that the goals are realistic.
Sales quotas can work to your advantage if set properly, and carefully. To get started with creating one, and to avoid the traps, the above pointers can come in handy for you. You can also check out Everstage’s Quota management tool, which can help you simplify the process as well. Book a demo with us now.