7 best practices for setting effective sales quotas
Sales quotas are tricky. If you set the bar too low for each sales rep, you risk not meeting overall company goals and rewarding weak performance. If you set the bar too high, you risk increasing employee turnover.
There’s simply too much at risk to rely on an arbitrary process for setting sales quotas.
So what’s the answer? Spend a huge amount of time sifting through CRM data for each sales rep, hoping it’s accurate enough to reflect future performance? Not quite. There is a LOT of value in historical CRM data, but there’s even more value by combining it with other actionable metrics.
Take a comprehensive approach by following these 7 best practices to set quotas that are balanced for each sales rep:
1) Use more than basic CRM data
CRM data can be incredibly valuable when assessing quotas, but there are plenty of other data sources that can be combined with CRM to give a completely clear picture of sales situations. Tracking buyer engagement and sales rep activities can help you assess how much of your reps’ historical quota attainment was due to outside factors vs. performance.
2) Flesh out quota expectations
Sales revenue is a good starting point for quotas, but that’s not all you should be relying on. Look closer at sales rep activity metrics such as number of calls made, emails sent and demos completed to really dig deep into the expectations for your sales reps.
3) Establish a baseline
Your company should have a minimum performance standard for sales reps, both in terms of quota and sales activities. How many sales calls and emails, at a minimum, do your sales reps need to send on a daily basis? How many demos and follow-on demos does it take to close a deal? If your sales reps are doing all those activities but still aren’t hitting quota, the quota is probably too high.
4) Don’t punish your top performers
Your sales quotas should not be the same for all sales reps. If your quotas are geared for the “B” performers, your C performers won’t be able to keep up and your A performers will get shortchanged. Balance quotas so that top performing reps get the recognition and compensation they deserve.
5) Work backward
Instead of establishing quotas based entirely on what you think your reps are capable of, think of the desired end result. If your company has business growth goals, do some math to see how many deals (at your average deal size) your reps will need to close. If that number doesn’t match up with the quotas based on historical data, it’s time to reevaluate your goals and how you’re planning on achieving them.
6) Communicate your reasoning
If you’re raising quotas, especially by a large margin, the worst thing you can do is drop it on your sales reps without a word of explanation. By communicating why quotas had to be raised (increased operating costs, loss of key customers, etc.), you’ll avoid resentment and most likely get more buy-in from your sales reps.
7) Know your market
Realistically, how many buyers are actually going to be interested in your products or services? Do you have a niche product or one that has appeal for a wide variety of industries? A solid understanding of your buyers and the market as a whole will help you establish realistic quotas.