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Setting and Achieving Sales Quotas: Best Practices for Sales Teams

Sales quotas can motivate your sales reps and help your business land more deals. Learn more about what sales quotas are and how to set them here.

When you're selling a product, there are a lot of metrics you need to keep an eye on. You must ensure you're on target to reach your long-term sales goals, and that doesn't happen by accident. Measuring your sales performance gives you a better understanding of your sales team, sales leaders, and how you're doing in relation to your goals.

Sales quotas are one of the most important metrics to look at when you're managing a team. Understanding how to set and achieve sales quotas are basic skills sales managers should have. Every team should focus on setting realistic quotas and understanding how many deals team members have to make to reach departmental goals.

Unrealistic quotas can put sales reps under a lot of pressure, and there's no reason to set quotas you can't realistically meet. A sales quota formula can help you create realistic quotas and support a healthy organization. With the right sales strategy, every team member can meet their quota, and your business can reach your long-term objectives.

So, what is a sales quota? What about a revenue and volume sales quota? If you want to learn more about sales quotas, why they're important, and how to choose the right quota number, we've got you covered.

Understanding sales quotas

Sales quotas are sales goals that are set for individual sales reps or teams. These quotas are designed to make sure team members are on track, which in turn helps the entire team meet long-term goals.

In a healthy sales environment, every member of the team should have a realistic sales quota that they can work toward. Keep in mind that specific quota numbers depend on your sales playbook and expected total volume, revenue, or profit.

There are different types of sales quotas, including combination and profit quotas. You can experiment with different types of quotas to see what works best for your team. Ideally, choose numbers that push sales reps but are realistically achievable.

Sales quotas vs. sales goals vs. sales targets: Key differences explained

Sales quotas, sales targets, and sales goals might sound like the same thing, but they're not.

Here's a quick breakdown of how these metrics differ from sales quotas and their role in your sales process.

Sales quotas vs. sales goals

Sales goals are long-term goals that a company sets as a whole, which may include increasing profits by a certain amount from the previous calendar year.

On the other hand, a quota in sales is a short-term goal set for individual sales teams or team members. These goals may be similar to sales goals but allow your sales reps to work toward individual objectives. Quotas also allow you to break long-term sales goals down into short-term targets.

Sales quotas vs. sales targets

Sales targets tell you what you need to do to achieve your sales goals. If you're trying to increase profits by 10%, your sales target would be the amount you'd need to sell to reach that goal. Sales targets give you a clear picture of what you can do to reach your sales goals, while quotas allow you to set individual benchmarks to make sure you reach sales targets.

Types of sales quotas

Sales quotas are straightforward for the most part, but there are several different types.

The type of quota you use determines how you calculate sales quotas, what objective team members are working toward, and how your quotas help you reach long-term sales goals.

We'll talk about the different types of sales quotas in the section below.

Activity quota

Activity sales quotas are based on sales reps performing certain actions, such as calling clients or scheduling meetings. These activity quotas are a good way to reward team members who don't close deals but play an essential role in the overall sales process. Even if someone isn't technically closing a deal and getting credit, you can reward their strong negotiation skills with an activity quota.

Combination quota

A combination quota is a sales quota that combines multiple other types of quotas. You can find combination sales quota examples online, but they can include everything from a combination of revenue and activity to profit and volume.

A combination quota that includes elements of an activity quota can be a good way to encourage sales reps to develop key sales skills. You can designate individual volume sales quotas for sales agents, but you can also set quotas that include scheduling meetings and following up with clients to keep them focused on developing those skills.

Forecast quota

Forecast quotas are formed by looking at historical sales data and improving upon previous metrics.

For example, you might look at sales data from Q4 of last year and decide you want to increase total revenue by 25%. You can use that information to develop sales quotas for each team member and even use a forecast quota as part of a combination quota.

These quotas are a great way to focus on improving sales team performance based on recorded data.

Profit quota

Profit quotas require sales reps to generate a certain amount of profit through sales in a specified period. You can determine how that profit quota translates to sales volume by calculating the average profit from each sale and seeing how many deals it would take to reach that profit quota.

These quotas depend heavily on average contract value. While gross profit quotas can be a great motivator, it's especially important to set realistic goals when discussing pure profit rather than volume or revenue.

Revenue quota

With a revenue quota, you set a revenue goal for sales reps to meet. It doesn't matter how much profit each sale generates or how many units team members sell as long as they reach the target.

This is one of the simplest and most commonly used types of sales quotas. Revenue quotas are simple to understand, and your sales reps will have an easier time visualizing their quota as it pertains to sales.

Volume quota

With a volume quota, each sales rep has a sales volume target. These quotas can vary from a dozen units to thousands of units depending on the product and the time you give sales reps to reach their quotas. Volume quotas are simple, which is why they're used frequently.

Why is setting sales quotas important?

Setting sales quotas is important because it gives your sales team a clear goal to work toward. Working toward long-term goals as a sales team can leave some people feeling left out or unmotivated, especially if you're easily reaching all of your targets. When everyone has a sales quota, they're motivated to reach those personal goals, which helps boost lead generation and overall performance.

Sales quotas also help hold people accountable. If your team is meeting every sales goal but a few team members are doing all the work, you're spending unnecessary resources on people who aren't contributing. Setting individual quotas means everyone has a goal they can work toward, and they're held responsible when they're not reaching that objective.

How to set sales quotas at your business

Getting started with sales quotas might seem intimidating, but it's pretty straightforward. That said, you have to choose the right sales quota type and number.

Here's how you can start using sales quotas to motivate your team:

  1. Choose the type of sales quota you want to use.
  2. Determine what you need in terms of sales to stay in business and establish a baseline.
  3. Decide on an approach.
    • A top-down approach involves setting goals based on high-level revenue goals.
    • A bottom-up involves setting goals based on sales rep target quotas,
  4. Identify your sales goals.
  5. Calculate your sales quota using the sales quota formula.

Tips for hitting sales quotas

Hitting sales quotas is important, but it's not always as easy as setting goals and working toward them.

Here are a few tips that can help you get started:

  • Be realistic with your sales quotas.
  • Motivate sales representatives with incentives.
  • Avoid commission caps to ensure you reward your sales reps for all their hard work, especially if they're going above and beyond your expectations.
  • Communication is key to leading an effective sales team, so communicate with agents often.
  • Make your expectations clear.
  • Verify sales representatives have the resources necessary to succeed.
  • Use technology to your advantage. Sales automation and other tools can help you reach quotas faster.

Reach your sales quotas with ease

Sales determine your bottom line, so setting and meeting quotas is crucial. Establishing realistic sales quotas can motivate your team, encouraging them to stay on track and satisfy your long-term goals.

With Mailchimp, meeting sales quotas has never been easier. Our audience management and marketing automation tools can help you generate more leads and give your business the boost it deserves. Try Mailchimp to see how our suite of tools can support you in growing your business.

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