Are you ready for next year? What are you doing differently? Do you have a plan that will drive success? Sales leaders need to plan for what’s ahead. An important piece of that plan involves the setting of quotas. Failing to set them correctly will impact your success. Learn how to become an expert in the science of quota setting.
Life is good when quotas are aligned. A salesforce typically experiences the following when set correctly:
- Higher employee morale
- Lower sales turnover
- Increased profits
Setting quotas should not be done in a vacuum. In our Annual Research Report we discuss the creation of a winning sales strategy. When building your sales strategy, you need to consider your organizational design. Within this phase, there are six steps that should be done in sequence. This sequence ensures you set your team up to win next year. After you design your territories, you move on to quota setting.
Learn more about each phase in organizational design by downloading the full report here.
There are important questions you need to answer when building your quotas. I’m going to review three of the top ones we see most often.
Do You Know the Potential of Each Account That Your Rep Is Responsible For?
When building your quotas, you need to consider the potential. The potential could be within an account or prospect. Creating a quota with disregard for potential is the wrong way to do it. It creates misalignment. You want to create a fair and level playing field for your team. Understand what the potential is before you assign a number. Make sure you look at internal and external data points. There are some great third-party vendors that can supplement your internal data. By using data, you take away the “bias” that comes with setting quotas.
What Is the Production Capacity for Each Rep?
When you set quotas, you need to consider “time.” Conduct a time study or workforce capacity plan on your team. This will identify how productive a rep can be. It also gives you visibility into the number of customers that someone can manage. Once you know the answer, you can add this analysis to your process. A foundation is established that can be used for:
- Changing of territories throughout the year
- Quota moving between reps when headcount changes
- Fiscal year rollout and planning for future years
What Is the Right Quota Mix?
Once you understand the potential and capacity, you can look at quota mix. In this step, you identify if there should be separate components. An example would involve a rep having a professional service and new product quota. It could also include an account manager having a renewal and upsell quota. In order to set correctly, you need to do the first two steps. Don’t just pick numbers and plug them in. Follow the process to ensure success. This will create the optimum quota mix that maximizes revenue coverage.
Partner for Success
Designing correct quotas is one of the biggest challenges a sales leader faces. You need to translate the corporate revenue goal into sales quotas that are balanced. If you set too high, you will kill morale and increase turnover. If you set too low, you will hurt profitability. Many organizations partner with finance and sales operations to set quota. If that is the case, share this report with them. Get everyone involved following the correct sequence.
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