For many sales organizations, sales quota setting is often a moving target. Ideally, sales quotas should clarify expectations for your sales team, enhance the efficiency of your overall sales operations, and help the entire team work together more effectively.
Unfortunately, for various reasons, sales quota setting tends to be an unpredictable, opaque, and time-consuming process. According to a survey from SiriusDecisions, 50 percent of sales organizations go through 5 to 10 iterations before finalizing their sales quotas, and 28 percent of organizations create more than 10 iterations. Without a reliable quota setting process, you’re sending your sales people into action without a solid plan. In fact, SiriusDecisions also found that 54 percent of companies don’t deliver their quotas until two weeks to a month after the start of the fiscal year.
When sales quotas are not clear and credible, sales opportunities fall through the cracks—and money is left on the table or gobbled up by your competitors. Here are a few tips on improving your sales quota setting in a way that works better for everyone on your sales team:
Create a consistent process.
A recent Anaplan webinar survey found that 38 percent of companies had a “lack of effective processes” to set quotas. At many companies, the process is rather arbitrary and less than transparent. For example, different sales reps might be assigned higher or lower quotas based on their past performance. Arbitrary variables might be ignored or over-emphasized. And in the worst case, companies might have no process at all. Ask yourself: Where do your company’s sales quotas come from?
Strike the right balance.
Setting sales quotas is all about finding the right balance. You should try to find a sales quota that meets the needs of your sales reps, your sales managers, your company as a whole, and that also syncs with your company’s overall business strategy. With a more transparent process, you’ll get sales reps buy-in of their sales quotas and in turn they will work harder toward reaching and exceeding those goals—because they believe in the process and they understand the decisions that led to that quota.
Weigh past performance vs. future opportunity.
Many organizations set their sales quotas based on the historical performance of individual sales reps, but that can have the unintended consequence of discouraging collaboration or penalizing your best sales people. Instead of simply upping last year’s quotas, take a closer look at the overall market opportunity and make sure your quotas are encouraging the right behaviors based on the unique regional drivers and competitive market.
If you are expanding into a new vertical, launching a new product, or otherwise incentivizing sales with an added challenge in the new year, the sales quota should represent this.
Learn more about how to consistently set effective sales quotas by checking out our SlideShare, “Plan to win: 5 success tips for better quotas.” Discover actionable insights on how to make your sales quotas more targeted and more credible in a way that boosts the performance of your entire sales organization.