How Realistic is your 2014 Sales Quota?

October 4, 2013 at 7:00 AM

QuotaDreamMy last blog discussed how to Make it Rain in Q4and close the year strong.  Today I have shifted the focus to next year. Making it rain is great, but sometimes (as many reps know) that isn’t enough. Oftentimes misguided quotas can become astronomical and outlandish. This blog addresses how sales reps can ensure their quota is realistic and attainable.  Many sales reps are forced to accept a quota that is neither. Don’t let this happen to you, arm yourself with knowledge.

Over 65% of Sales Goals are driven by Executive and Corporate expectations. If their projections are unrealistic, so are the sales reps’ quotas. To avoid this, reps should assert themselves into these quota discussions.  These discussions must be data-driven and not emotional appeals. The importance of these discussions should not be overlooked. Without them, “Pie-In-the-Sky” quotas can become the norm.

How to Determine if your Quota is Realistic

Don’t worry if you aren’t sure how to get started. It’s not always an easy thing to do. Download our Quota Validation Guide for Sales to see which metrics align to realistic quotas. This type of research will earn you respect and a listening ear.

Quota Validation Guide for Sales

There are two main focus areas of quota setting:

  1. Top-Down Quota Setting
  2. Bottom-Up Quota Setting

Here’s a quick primer on these two main areas of focus. As a sales rep, it’s important to understand how upper management views quota setting. Understanding their perspective will go a long way towards your analysis and case.

Top-Down Quota Setting:

Metrics that mean the most to Upper Management and Owners

  • Historical Revenue Performance:  Usually the baseline for drafting next year's quota. For many companies, it is the only data analyzed when setting quotas.
  • Market Growth:  Often the basis of quota-setting for rapidly growing markets or products. In these instances, historical growth rates don’t accurately predict revenue for the next year. 
  • Wall Street or Owner Expectations: CEO and CSOs are judged on beating owner expectations. If they don’t meet owner expectations, the whole operation is in jeopardy. Sometimes this metric is all that matters.

Bottom-Up Quota Setting:

Validating quota from a Sales Rep & Sales Management perspective

  • Territory Potential: Growth rates for newer territories will rapidly outpace more mature markets. Territory potential can vary widely based on demographic trends and Ideal Customer Profile saturation. 
  • Product Maturity: How mature is the product in the marketplace? A hot new product can go a long way. A mature product will likely have more consistent, steady metrics. However, mature products have substantially lower growth rates than newborn and juvenile products. This will clearly affect your ability to reach quotas. 
  • Account Planning: In large dollar transactions, company knowledge, trends and purchasing habits are crucial. Understanding the buying cycle of large customers helps establish a reasonable quota. 
  • Sales Capacity:  Driving revenue is directly related to the time available to pursue active opportunities.  Determine how much of your time is spent in "non-selling" activities. Perform a Time Optimization Study if you need to. It will provide a realistic idea for how much time you have to sell. This will then inform your thoughts about your 2014 quota.

Refer to the Quota Validation Guide for additional metrics which pertain to sales management. These include Territory Vacancy Rate and Talent Level (sales rep).

Ideal quota setting takes both approaches into consideration.  As a sales rep, you need to understand the impact of Bottom-Up quota setting. These are the metrics often get overlooked in the quota setting process. That means this is where you can make the most impact in achieving quota-setting reform. It’s certainly this metric that hits closest to home when trying to make the number. 

Consider downloading the Quota Validation Guide for Sales to understand realistic quota setting. Don’t fight through another year with an unattainable quota. Discover whether or not yours truly is attainable. If it isn’t, do the research and work necessary to institute change.

Joel McCabe

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Topics: Quota Setting, Sales Rep Resources, Sales Strategies, Setting Quotas, Sales Quotas, Sales Resources

Posted by Joel McCabe

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