How To Set an Attainable Sales Quota for Your Team

Chances are, if you're reading this you're well aware how important sales quotas are to business objectives. They're the backbone of sales efforts worldwide, and without them your sales team will be left without direction, without incentive, and likely with a poorer sales process.

But how well do you understand sales quotas? Do you know all the different types of sales quota? Do you know the difference between sales quotas, sales targets, and profit quotas? And, most importantly, do you know the best ways to set sales quotas that sales teams can reach without burning out? Finding the balance between 'challenging' and 'impossible' can be one of the hardest tasks sales managers face.

That's why we sat down with Elyse Archer, renowned sales coach, to discuss how sales leaders can set  long-term goals - and actually boost sales - with progressive sales quotas your sales team will love. And as a founder and CEO of She Sells - not to mention an empowering figure for women in sales - Elyse knows what she's talking about.

So let's take a look at all things sales quota - from definitions and types of sales quotas to implementation methods and the importance of healthy quota setting.

What's the difference between sales quotas and sales targets?

Sales quotas are targets your sales team has to reach, right? But hang on - doesn't that mean sales quotas are the same as sales targets? After all, they're both targets for how much a sales rep should sell.

Well, yes and no. While both sales quotas and sales targets and used by sales organizations to drive output and monitor revenue goals, the two are subtly distinct and are not used interchangeably. Let's explain:

Sales Targets

A sales target is a broad goal set by a company to drive overall sales performance within a period of time and provide the entire company - from leaders and managers all the way down to sales representatives - with a direction. An example might look something like this:

• This company wants to achieve $10 million in total software sales revenue for the fiscal year 2024/25

As you can see, this target is aimed at the whole company, and therefore covers the combined efforts of marketing, sales, lead generation etc.

Sales Quotas

In contrast, a sales quota is a specific number assigned to an individual sales rep to achieve either monthly, quarterly, or annually. This result then feeds into the company's overall sales target.

Rather than defining a company's goal, like a sales target, a sales quota is designed to assess an individual sales rep's performance and make sure they're hitting important benchmarks.

Here's an example:

• Jane Smith (sales rep) should aim for $50,000 in new software sales per month

Another important difference is that setting sales quotes is often used to incentivise sales reps financially: basically, if a sales rep reaches their quota, they usually get a commission (say, 10%).

Other types of sales quota

Of course, quotas aren't limited to sales; a healthy sales organization will adopt a revenue quota, a volume quota, a forecast quota, an activity quota, and so on. So, let's take a look at the five main types of sales quotas.

1. Revenue quota
   
   • A revenue sales quota is designed to outline sales goals based on revenue made - i.e. to make $100,000 in sales each quarter.
2. Volume quota
   
   • These provide guidance on the number of units each rep should be aiming to sell (independent of revenue).
3. Activity quota
   
   • Sales leaders want to ensure their sales teams aren't cutting corners, right? Well, an activity quota sets goals for behaviour, such as the number of cold calls made and number of emails sent.
4. Profit quota
   
   • This is similar to a revenue quota, except it sets a goal for actual profit-per-sale, rather than overall revenue made by the company.
5. Combination quota
   
   • In order to find a balance between difference types of sales quotas for your sales team, companies often use combination quotas; these combine several of the above quotas into one digestible goal for each sales rep.

Companies that most successfully employ quotas to reach a revenue target use all of the above, but know where and when to implement them. Sales quotas shouldn't all fall on the shoulders of sales reps.

How to set healthy sales quotas for your sales team

During our conversation with Elyse, she pointed out some of the pitfalls of traditional quota-based sales approaches - pitfalls which eventually led her to start her own company, She Sells. If companies aren't careful with setting sales quotas, they can easily end up with burnt-out reps, disillusioned sales managers, and overly-complicated sales procedures. The combination of these can actually lead to missed revenue targets, too, so there's a financial incentive to take a healthier approach to sales quotas.

Let's discuss the ways in which a company can implement achievable sales quotas that are the perfect combination of challenging and realistic.

Analyze historical data

It's imperative to get a firm grasp of your company's past performance in order to set realistic goals for the future. Spend time analyzing trends in everything from seasonality and market conditions to successful sales strategies and common pain points to come up with a sales quota that strives for growth without blowing all hope out of the water.

Involve the sales reps

Traditionally, executives and sales managers are responsible for outlining goals and quota setting. But more and more companies are taking a bottom-up approach, collaborating intensely with sales reps to gain a better insight into their issues and preferences so that they can create tailored sales quotas the sales team believes in. It's one thing to have a quota dictated to you, quite another to have agreed on one mutually.

Provide adequate resources

While 'selling' is up to sales teams, proving the resources necessary to sell is down to sales leaders. We've all held positions where we've had to battle enormous quotas with nothing but the bare minimum in tech. It's not fun. It's not fair, either - so make sure every level of the team has the resources necessary to succeed.

Incentivize and recognize success

Setting sales quotas is one thing, but motivating sales reps to reach them is another. Rewards don't have to be huge bonuses (though that helps!), but there should be some kind of framework to recognize hard work well done. According to Gallup, less than 70% of Americans feel engaged at work - strong incentives would be sure to boost engagement and productivity. Sales goals shouldn't just benefit the company; they should incentivize sales teams so they want to hit quota too.

Make quotas clear

When you hand a sales quota to a rep, there should be no room for misinterpretation. Not only could this cause anxiety for the rep, but it could also negatively impact your sales processes. Sales reps should also be aware how their sales quota fits into wider business objectives, such as revenue targets, market expansion, and new product launches, so that you can align your sales process more effectively.

Get ahead by mastering the art of the sales quota

If this article has taught you one thing, we hope it's this: that creating perfect sales goals isn't simply a matter of crunching some numbers on a calculator. While any company certainly needs a revenue sales quota based purely on numbers, getting the best out of your sales reps - therefore achieving sales quotas more effectively and driving gross profit - means amalgamating a whole host of considerations.

It's essential to create realistic forecasts based on historical data and market conditions, as well as to put your sales reps at the forefront of quota-setting; a good sales leader needs to communicate with their team, provide adequate resources, and to ensure quota attainment through incentives and recognition.

If you're interested in learning more about Elyse's journey or her ground-breaking company, find her on LinkedIn or on her website.

And for business leaders looking for ways to break a deadlock with enhanced lead generation and industry-leading sales development services, look no further than Leadium. Our decade of experience, founder-led approach, and multi-channel engagement strategy are your keys to sales success.