Even though "Sales Quotas" is one of the most recognized terms in any sales performance management, many of us are still unclear of this concept. This article walks you through the meaning of sales quota, the need to set sales quota, and a brief introduction on the different types of sales quota.

A goal without a deadline is just a dream. Whether you are an individual or an organization, setting goals is the first step in making progress. After all, goal setting and benchmark are what helps us recognize when we’re improving and evolving. Similarly, for the sales team, sales quotas act as this benchmark needed to motivate the sales reps to perform their best. These quotas play a crucial role in the growth of the organization.

Before diving in any further, let us understand what is a sales quota?

A sales quota refers to a financial, volume-based, or time-bound sales target set by the company for the sales reps that must be met at the end of a specific period. Sales quotas are often time-sensitive and attached to a daily, monthly, quarterly, or yearly period. Quota or sales target can be measured in different ways, like sales, profits achieved, new customers or prospects attained, or even through product or service demonstrations.

Now, why do you need these sales quotas?

Precisely, to get higher profits and more predictable sales. This is what every organization strives for. Attaining your sales quotas is a sign that your sales team is performing extremely well. And who doesn’t want that?

Quotas are the driving force behind the whole sales team and they are set by the management as a means to encourage the sales team to collectively work towards meeting the organization’s goals set for any given year. However, there isn’t a one-size quota solution that can tend to your organizational needs. Rather, to maximize your sales and build a perfect organizational strategy, quotas can be set in different shapes and sizes.

According to a study, one fact about quotas is that almost 67% of sales professionals don't meet their individual quotas. Worst of all, 23% of companies surveyed are not aware whether their sales teams have achieved their quotas or not! To avoid such situations in your organization and to give you a better understanding of sales quotas and quota attainment, let’s take a look at the different types of quotas.

Different Types of Quotas

1. Revenue Quota

In this quota, reps are expected to sell a specific number of units to earn a certain amount or revenue within a specified time period. The goal is to incentivize revenue per unit as much as possible.

2. Forecast Quota

Forecast quotas are generally assigned based on the historical precedents of a region, market share, or prior product and the revenue target that must be generated.

3. Activity Quota

Activity quotas are performance measures that track a set of activities of the sales process. This requires the salesperson to carry several activities during a given period like phone calls every week, follow-up emails, scheduling meetings, closing a certain number of deals, acquiring numbers of new clients.

4. Volume-based Quota

Volume-based quota requires your reps to close a certain number of deals or sell enough units or services to meet your goal. This quota mostly comes in handy when it is a priority to increase your market presence.

5. Account Opportunity Quota

Account opportunity-driven quotas consider variations in the market as well as attributes of the accounts. Revenue retention, penetration, pipeline opportunities, and new customer acquisition are the components for building an account opportunity quota.

To Conclude…

Quota setting is a challenging task that requires strong analytical skills and deep insights into your business. You need to determine your organization’s standard of performance to establish a realistic baseline. Keep in mind your business goals and structure before setting a target of sales your reps need to hit to meet the basic needs of your business.

Finally, you need to make sure that the quotas are ambitious but achievable, or you risk demotivating your team and causing high attrition.

What is your take on sales quota? How do you get your team to attain these quotas? Feel free to drop your thoughts or any tips in the comment section below.

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