Posted by Early Growth
October 13, 2021 | 4-minute read (725 words)
You've launched your company, built a client base, and employed a talented sales team; now, it's time to figure out how to measure your sales team's deliverables. Setting a sales quota may be the answer for certain firms.
Here's how it works: A sales quota is a consequence of data-driven sales planning that allows you to keep track of your company's sales targets. Over time, you may use the quota to define and track performance goals for business units, sales teams, and salespeople. It also assists you in identifying reps who need to enhance their abilities and sales activities that lead to more successful deals. To create sales quotas for your firm, follow these six steps.
Most companies employ one of two sales quota strategies: top-down or bottom-up, or a hybrid of the two. The target is defined under the Top-Down method based on the market and territory's sales potential, competition data, and current trends. The sales staff is given figures to achieve the firm's goals once the corporation establishes a target amount.
In the Bottom-Up technique, the sales team forecasts next year's revenue by adding a specific growth percentage to the previous year's sales data and historical performances or experiences in various geographic areas. Following the establishment of that figure, the sales team members assign quotas.
- Develop a strategy
Volume, cost, profit, and activity are the four primary categories of sales variables that may be used to track sales success over time.
The amount of units sold or subscriptions to produce income for that time period is tracked by volume quota. You must complete a certain number of activities within a certain amount of time, such as making phone calls, sending emails, attending meetings or appointments, and leading demos according to your activity quota.
The profit quota defines how much profit each salesperson brings in for the business. A team member's ability to minimize expenses per deal — such as spent time, discounts, or travel costs — is measured by a cost-based sales quota. Based on the nature of their organization, sales teams may work with any sales quota or a combination of two or more.
- Decide on a sales quota
You'll be able to set reasonable quotas if you have a thorough grasp of purchasers in various locations and historical data. First, make revenue or sales projection based on existing market opportunities or conditions. Divide the data into territories or regions and then down to individual salespeople. Next, figure out how many new customers/deals you'll need to meet your target. To calculate the individual sales quota, divide the number of prospective new clients by 12 months and the number of sales professionals on your team.
- Establish a sales quota
Setting sales quotas that are both difficult and realistic is critical. Review the team's initial quotas and the number of leads it took to close those transactions before establishing new individual sales targets. Now double-check that you've established attainable and reasonable targets, and then concentrate on methods to meet them or adjust your quotas if necessary.
According to many sales professionals, 80% of your team can reach an efficient sales quota while being within 5% of your baseline measure. On the other hand, if the entire team consistently achieves or exceeds its quota, or if performance lags, it's time to rethink your quota-allocation process.
- Double-check your sales targets
Turn your sales team's quotas into achievable daily, weekly, or monthly responsibilities by explaining how you computed them and how/when they'll be measured. Ensure that they are focused and motivated to achieve tiny victories rather than focusing on the big picture. If conversion rates differ, set different quotas for sales teams managing different market segments, goods, or accounts (foreign and national).
- Divide sales quotas into activities that can be completed
Review sales performance versus objectives regularly, such as once a week or once a month. This gives sales managers the ability to recognize and solve performance issues rapidly. Establish a minimal performance criterion for comparing sales performance to sales quotas. To inspire your sales staff to achieve more, provide them rewards for reaching or surpassing their quotas. Initial predictions and quotas may become obsolete if market conditions change dramatically. In such cases, based on market demands, you can increase or reduce targets from one quota period to the next.
- Regularly evaluate and reward your sales team