Sales quotas are a critical part of growing your business. They provide concrete steps to taking your company where you want it to grow.

They also require a delicate balance: set the quota too low, and sales fall flat. Set them too high, though, and you run the real risk of frustrating and alienating your sales team.

Here are some best practices on how to set more accurate sales quotas and how to motivate your team to hit them. Plus, we added some templates and software to help you create an effective sales quota for your team.


What Is a Sales Quota?


A sales quota is a target set by management for a certain time period, usually a month or quarter. A quota can be for a set region, sales team, or individual rep. Leadership typically measures quotas based on a dollar figure, rep activity or number of goods or services sold.

Creating realistic quotas gives sales teams achievable goals and benchmarks to  Sales quotas have a number of benefits for sales teams:

  • More accurate sales forecasting
  • Better monitoring for sales rep activity
  • Clearly set expectations for reps
  • Motivation for sales reps to maintain a certain level of activity

Setting and analyzing quotas can also alert sales managers if there is a weakness or bottleneck in the sales pipeline, as well as gain insights into their team’s sales process, productivity, and success rate. Besides holding sales reps accountable, quotas are also a chance to recognize and highlight sales reps that are successful.

By setting effective sales quotas, leadership can achieve a number of sales benefits to gain momentum for their teams and insights for a better sales process.


Quota Setting Best Practices


While sales quotas offer a number of benefits, not all sales quotas are the same. If they are impossible for your team to achieve or fail to take the most vital aspects of your business into account, for example, they will not achieve what you hope. However, well-made quotas will provide your team with valuable motivation and leadership with vital insights.

Here are some tips to make sure that you’re setting effective:


Distinguish Goals From Quotas


Some people use the terms sales goals and sales quotas interchangeably, but they have two separate functions in your organization. Sales goals are all about your overall dreams for your business. Leaders set sales goals to look at the long run. What markets would you like to dominate? What kind of revenue do you want your business to earn? Goals are about looking ahead.

Sales quotas, on the other hand, is the tool you use to reach your overall goals. It combines your vision with practical steps to guide your sales team. Sales quotas provide the practicality needed to grow your company.

The oft-quoted rule of thumb for good sales quotas is that it can be achieved by 80% of your sales team and within 5% of your baseline metric. Like any rule of thumb, though, it rarely helps sales managers and leaders with the specifics. It’s often possible for companies to reach more than 5%, depending on your specific company and market. Likewise, 5% may be too much of a stretch for another particular company.


Set Reality-Based Quotas


A sales quota based on growth goals alone is likely to alienate even your best sales reps. Only 30% of sales reps hit their quota when it's based on growth goals alone. Your sales team will quickly grow discouraged when they find that the quota they are expected to meet doesn’t match the reality that they are experiencing in the field.

Discouraged salespeople can hurt your company. Besides the damaged morale, unrealistic quotas are the second most common reason that sales reps leave a company. Replacing sales reps can be very costly: it takes 21 months on average for a salesperson to turn their first profit. Your profits are likely to take a hit if your company works like a revolving door for your sales team.

To create the highest profit for your company, you need to create a sales quota based on reality. This means that you need to take your sales history into account. If you don't look at what your sales team has been capable of in the past, you are unlikely to create an accurate quota.

By utilizing sales technology, such as your CRM, you can look at your past statistics to get a better picture of how you can improve your quota.


Avoid the Rear-View Mirror Trap


Creating a sales quota based on your goals alone can be a dangerous, and potentially costly, mistake, but many managers and executives run into the opposite problem as well. They choose to rely solely on past data to create their sales data.

Referred to as the Rear-View Mirror Trap, it doesn’t take into account the current market and environment. It can potentially run into the problem of either setting the bar too high or too low.

The holiday season, for example, could seriously skew the historical data. If you doubled your sales in November and December, for instance, it probably would be unrealistic to expect the same numbers in January. Often, sales reps will feel betrayed when management increases their quota after a good month or quarter. If they're working in the same territory as earlier, then there are fewer people to sell to since they many prospects were turned into clients.

To account for these fluctuations, some leaders opt to do a yearly analysis instead. However, an economic downturn or continued dominance in a territory may make relying solely on history disheartening for your sales team.

Businesses are in constant flux too. New products or services, new territories, and new marketing ventures can all change the landscape for your sales team. Basing your quotas on past sales alone will probably not take the changes your company is experiencing into account.

To get the most accurate quota for your sales team, you need to take the market forecast into account as well as historical data. Technology can help you sort out the potential for the upcoming quarter as opposed to looking at history alone. They can allow you to see how many potential clients are in the pipeline, for example, to give you a sense of how well you can expect your sales reps to perform.



How to Set a Motivating Sales Quota


Since relying on your sales goals and sales history will only frustrate your sales team, is it worth setting a sales quota at all?

Yes!

When you set a sales quota that utilizes modern technology, you can create a sales quota that will motivate your salespeople to continue reaching for their goals and stretch themselves just the right amount.

The key is in creating individualized and activity-based quotas.


Individualize Quotas


Not all of your sales reps are the same. Each one has different territories, expertise, experience, abilities, and products that will all affect how they will perform individually.

Sales tech allows you to avoid the "top-down" or "peanut butter" effect where sales quotas are spread evenly amongst your sales staff. Instead, quotas should reflect where each salesperson is in their sales journey to motivate them.

High performing sales reps should feel challenged just enough to avoid complacency. Newer sales reps or those put in more difficult territories, on the other hand, should be encouraged rather than deflated by their sales quotas.

For example, if you have two salespeople in different territories where one has a longer sales cycle length because of the clientele in that area. Even if they start with the same number of leads, the sales rep with the shorter sales cycle is likely to outsell the longer one. Their quotas, then, should reflect their sales environment.

By individualizing your quota, you can create a more accurate quota that will motivate, rather than deflate, your employees.


Use Activities


In times past, goals were often based on financial considerations. If everyone was selling the same product, a sales rep would be required to sell so many units each month. If there were different products, they might be expected to sell a certain dollar amount during a set period.

However, faced with a certain number each month can be daunting for your sales team. Instead, an activity-based quota allows them to break down how much they need to do each day and makes it more manageable to accomplish. It also allows you to track how much your employees are working. Is it a bad month, or are your salespeople failing to put in the work? An activity-based quota allows leadership to see what is going on and motivate sales reps to put in the work necessary to win the sales.

The use of activity-based quotas utilizes the concept of “small wins.” An idea innovated by psychologist Karl Weick, "small wins" explores how hitting small and achievable goals will motivate a person to continue to strive towards a larger, overall goal. If the task before them is too daunting, though, they likely feel too defeated from the beginning even to start.

Harnessing these small wins will energize your sales reps when the thought of reaching their overall sales target feels too far away. Especially at the beginning of the month or whenever they receive their sales quota, concentrating on daily tasks will keep them from overwhelm and help them to start making strides to meet their quota.

Activity-based quotas create a more productive work environment, but leaders shied from using them in the past because they were difficult to track. Sales reps often didn't have time to notate every phone call, follow-up email, or demo when they were busy making sales. However, technology makes it easier than ever to keep active tabs on each interaction with a potential client.

Your CRM can help management and sales reps see precisely how much work they can accomplish to help them stay motivated even if their overall quota seems daunting.


Stay Focused on Your Sales Quota


Don’t run into the trap of a “set it and forget it” sales quota. Sales quotas aren't made just to be visited at a monthly, quarterly, or yearly meeting to see if they were met. They need to be looked at regularly if you want to achieve them.

You don't set sales quotas for the fun of it. They are the achievable steps to meet your overall sales goals. If your team is going to meet them, then, they need to stay focused on meeting their sales quota continually.

You can harness technology to make sure that your sales team can see where they are on the journey to making their sales quotas. Our CRM allows them to take stock of their activities daily to make sure that they’re on the right track to meet their quota. They can then get the small win they need to continue striving towards their goals.


Sales Quota Templates



No two sales teams are exactly the same, so their sales quotas shouldn’t be either. To get the most out of your team quota, a template can provide valuable direction.

The most basic formula for creating a baseline sales quota is:

Average closed deals a month x Average contract value


However, the most accurate and effective sales quotas should also include average number of leads, number of target activities (such as 30 follow up emails or 10 demos a week), any extra bonuses, reps base salary, target incentive pay, and target total compensation.

When it comes to creating a comprehensive quota, then, a template can help you sort out the vital information to come up with one that is accurate and fair. Some online templates include:


Yesware Sales Quota Calculator



Perfect for: Leaders with a specific goal in mind and want to create quotas that will help them attain it

Yesware offers the ultimate calculator to help you create a quota with ease. They offer two ways to calculate the right quota for your team: the top-down approach or bottom-up approach. Simply put in the information for your team, such as number of reps, average sales size, and your goals. The calculator will then compute the sales, customers, and revenues your reps will need to produce each month to hit your goals.


Excel’s Sales Quota Threshold



Perfect for: Valuable insights into reps performance both against each other and over a period of time

Excel has been the go-to office and leadership tool for decades. If you are still using this classic, you should be happy to know that they offer help with setting quotas as well. You can use the clustered column chart to set your sales quotas. It also has the added bonus of allowing you to see a breakdown of rep performance and identifying the top reps on your team.


Klipfolio’s Sales Quota Attainment



Perfect for: Measuring reps separately for better quotas without complex formulas

Not all your sales reps can or will have the same quote. Personalizing them based on rep experience, territory, and other factors can be challenging, though. Klipfolio has a simple and useful template to help you evaluate individual quotas. This way, you can create both custom quotas with personalized time frames to match each sales rep.


Calculator Soup Profit Goal Calculator



Perfect for: Setting profit-based quotas

Calculator Soup is a simple calculator where you can enter your average sales (either monthly or quarterly), profits, variable and fixed costs. It will then compute your quota or goal amount.

If you’re trying to figure out how to reach your target profit, this calculator can help you too. It will compute what your projected sales and variable costs will need to be to meet your goals. You can also set your sales and variable costs to see what effect that will have as well.


Panalysis Sales or Conversion Target Calculator



Perfect for: Determining target quotas

This calculator, on the other hand, helps you figure out what each rep’s target quota should be. You can set the primary goal for revenue, determine your conversion rate, average value for each individual sale, estimated current revenue, and any trends in growth.

Being able to calculate each rep on an individualized basis can help you adjust for territory, market opportunity, and rep experience.


Smartsheet’s Sales Plan Template



Perfect for: Determining quotas on Excel

Another Excel spreadsheet for those new to setting quotas, Smartsheet offers a simple template that allows you to look at monthly and yearly quotas in one template. You can also compare with the previous year to see where you stack up and if your team is on track to meet the quotas.

This overview of sales also allows leaders to gain insights into seasonal trends to help you create more accurate sales forecasts as well.


Software to Improve Your Sales Quotas


Templates can provide helpful insights in the beginning. However, if you need more insights, more accurate quotas and if you find that your reps are struggling to meet the quotas you set for them, then software can help.

Here are some software you can use to create the most accurate quotas:


Customer Relationship Management to Improve Your Sales Quotas


One of your most powerful tools, you likely already have. A CRM has all of the data you need to create an accurate quota. It can also provide insights into specific reps, territories, and customer bases to make sure you create as accurate a quota as possible.

Data is critical to creating accurate quotas. Harvard Business Review found that organizations who use data for their decision-making are 6% more profitable than those who do not. A CRM is one of the best ways to get insights to manage and monitor your sales team.


Anaplan’s Quota Planning and Management Software



Data-driven insights can help you create the most accurate sales quotas that align with the goals of the sales team and company. Anaplan’s software makes it easy to harness data for predictive insights and create individualized plans for your reps. It also makes managing complex plans simple, so that you can find what information you need quickly and effortlessly.


Xactly’s Capacity and Quota Planning



Xactly’s quota planning tool is helpful in weaving your team’s quotas into an overall sales strategy. They offer a real-time dashboard that monitors and optimizes your sales plans in real-time to make sure you have as accurate an overview as possible. It also integrates into existing CRMs for as accurate data as possible.


Map My Customers for Field Sales Activity Tracking


While setting quotas is vital, tracking them is just as critical to ensure your reps will hit them. One of the best ways to do so is through tracking sales rep activities to make sure that they are taking the steps they need to reach their quotas.

Map My Customers can help leaders with the oversight necessary to make sure that quotas are met.  With accurate reporting features, sales managers can track rep activities and ensure that quotas are fair according to their effort and performance.


Start your 14-day free trial with Map My Customers


Get Ahead With Better Sales Quotas


The old ways of creating sales quotas aren’t enough to keep up in the competitive market. Basing a sales quota on your sales goals or history alone isn’t accurate. It leads to discouraged sales teams and worrisome turnover that could seriously damage your business and eat into your profits.

Utilize sales technology to energize, motivate, and retain your sales team. An individualized and activity-based quota will help keep your sales reps from feeling frustrated, overwhelmed, or burnt out by their sales quotas. Also, make sure that both your leadership and sales team look at the sales quotas and where they measure up.

By celebrating the small wins and giving them something they can control, such as how many phone calls they make in a day, will improve your company culture and help your reps meet their quotas.

Create better quotas and happier employees by utilizing technology today!