If you have a product or service that you want to sell, the chances are good that you have set a sales quota, goal or target. Setting quotas is a powerful tool that companies use to drive and manage growth, monitor sales rep activity, and promote revenue attainment. But have you ever considered what makes an effective quota?
Effective quotas are realistic, incentivize sales reps, and align with the needs and considerations of your business. Quotas help you break large revenue and sales goals into manageable, timebound milestones. You may take a top-down approach, setting a goal for your company, and then splitting up the amount evenly across all your reps. Alternately, you may set quotas for individual reps based on what you know they are capable of achieving, then add up those numbers to determine your overall sales goal – this is called a bottom-up approach.
When setting quotas for your company, there are a few key things you should consider:
Is it realistic?
Setting unrealistic goals for your sales reps may seem like a good idea, but goals have to be attainable to be effective. If a rep knows they can’t meet a goal, they won’t try. Targets set too high can lead to bad morale, which often turns into high turnover. The worst-case scenario of an unrealistic goal would be if a sales rep became desperate and started doing unethical things to meet the goal – or make it look like they met the goal. You are far better off setting realistic goals that are challenging, but within reach for your sales team. Realistic goals are a commitment to the sales teams to reward achievement.
Does it incentivize the rep?
Money and its motivation is one of the key goals of quotas. Many skilled salespeople will be engaged in the quota system and will have a strong desire to meet or exceed the quota to earn more. Again, this is where realistic goals are essential. Reps should feel like success is within reach, not burn themselves out trying to get there. You can also set quotas to incentivize your reps to focus on specific areas. For example, you can encourage your team to focus on high-profit products by breaking those quotas apart from other goods you sell. A good percentage of a reps comp should be quota based.
Does it align with the company’s current state of growth?
Your sales team should feel engaged in the process of growing your company. If you set a high quota during a slow period, they may not have the support they need to achieve the goal. Similarly, you don’t want to set lower quotas when the company is doing well. Your job as the business leader is to strategize for long-term growth, and then set quotas that encourage your sales team to help you meet long-term goals. And most importantly, consistent communication relative to progress
Consider the timing/time of year
Anticipate and plan the seasonality, your company experiences, like a spike in prospects at a specific time of year. You will want to adjust quotas accordingly. If you are selling gym memberships, that means you set higher goals in January than at other times of the year. Or you may want to set quotas so that your team is more motivated to hit targets at the end of a quarter, or financial period. Adjusting quotas for these types of considerations allows them to be effective and motivate your sales team.
Does it support incremental growth?
One of the clear benefits of setting quotas is its ability to motivate growth at a steady pace. By breaking out a large goal into smaller ones, it feels more manageable to your team and also makes it easier for you to plan for financially.
Setting effective sales quotas is an important part of your business strategy. By considering the factors that make a good quota, you set your sales team up for success and properly incentivize your reps. You can implement quotas in a variety of ways, but all methods should come back to two things – a strong sales team and sustainable revenue growth.
Quotas without activity targets are useless.
Setting effective sales quotas requires thinking through and setting the “leading indicators” activities that will deliver the quota. For example, calls per day, new senior relationships with clients, new clients, cross-sell presentations made all are possible leading indicators. By considering the “activities” that make a good quota, you set your sales team up for success and are able to coach their day to day behaviors.