Your company may have different approaches to assigning quota to the sales team but are you able to accurately track your progress?

Are you using some online tool to calculate your progress but still struggling to achieve your targets on time?

Let's take a step-by-step approach to understand what sales quota means to a company and how salespeople can accurately track it.

Firstly, let's discuss various sales quotas and why they are important for a company to grow and incentivize their sales reps!

• Volume quota: This is to incentivize salespeople to sell more units. This is helpful for companies that have shorter sales cycles and fixed pricing. With this quota, salespeople can sell a set number of units in a given time frame. Sometimes sales managers offer additional bonuses if a sales person exceeds the quota.

• Revenue quota: This is a very straightforward way of setting goals for your sales team. Sales leaders assign revenue targets to their sales reps. There could be creative ways to achieve this quota, by either selling different products based on their sales cycles or focusing on one product that can help achieve quota faster.

• Profit quota: This depends on the profit generated in a set timeframe, be it monthly or quarterly! This type of quota structure helps companies maintain their cost structure so salespeople don’t overspend to achieve their revenue goals.

‍

• Activity quota: This type of quota is usually applicable to inside sales teams or SDRs/BDRs that are solely focused on prospecting and have to make multiple attempts through calls, emails, social media outreach. This type of quota depends on the number of emails, calls and other attempts made to generate leads.

• Forecast quota: This is usually assigned to a team and usually comes as a top-down guidance. For global companies, usually central teams have visibility into every region's past performance, so based on their historical numbers as well as market trends, they decide their quota. Sometimes central teams take inputs from the regional teams as well to understand potential bottlenecks.

• Combination quota: As the name suggests, this is a combination of two or more quotas and usually applies to multidisciplinary teams with longer sales cycles. For e.g., if volume based and activity based quotas are combined, then salespeople have to find out the leads that are more targeted or have higher potential to convert.

Now, let’s try to understand how quotas are calculated and what are the different ways to track your progress

Quota is normally in line with the company’s revenue goals. If a central team decides the sales quota, then it's more likely that your company is adopting a top-down approach. Top-down approach has its advantages and disadvantages! In this approach, sales quota is usually set by the company executives based on the company's growth targets combined with the market trends. It may also be a reflection of the investor expectations that company executives are trying to fulfil. The downside though is that the sales teams sometimes feel pressured to achieve over-ambitious goals (if that's the case).

‍

"Flyte can help sales leaders with deep insights into client conversations. This can be helpful in making crucial decisions such as setting revenue goals and sales quotas"

‍

Most companies adopt a bottom-up approach as they rely on the sales team’s expertise and market sense to make a judgement. However, sales leaders need to further validate the bottom-up numbers by understanding client’s sentiments and competitive landscape by analyzing sales conversations, where by the way, Flyte can help sales leaders with deep insights into client conversations. This can be helpful in making crucial decisions such as setting revenue goals and sales quotas. That's why, the management and sales leaders need to understand the baseline for a year that takes into account the growth expectations for a company and sales team's capacity to achieve certain goals. There can be multiple factors such as regional impact or market conditions or seasonality etc that play a key role in setting the yearly targets.

‍

Let’s calculate how (on a high level) sales reps can track their progress and number of leads required to achieve their target:

For top-down approach: Since company executives decide the quota in this case, sales team should be able to calculate how many leads they need to generate to achieve their assigned quota

‍

Let's assume initial variables to begin with:

• Top-down monthly quota = $50,000
• MQL to SQL conversion rate = 10%
• SQLs to close conversion rate = 25%
• Average monthly revenue from new deals = $40,000
• Average size of a new deal = $10,000
  

To track your progress, here is a simple calculation:

• Number of new deals that a rep can close = 4 ($40,000/$10,000)
• Number of deals rep needs to work on = 16 (4/25%)
• Number of MQLs needed to achieve total new deals = 160 (16/10%)

Now new deals got you $40K of revenue but you still need $10K of additional revenue to achieve your quota. So either you explore new opportunities or you can look into your existing deals to see if there is any upselling/cross-selling opportunity. This would depend on the sales cycle, type of product, client needs, pricing etc. You may need to strategically pick those existing deals that have potential upselling/cross-selling opportunities. Let’s calculate how many of those deals are needed to get to the quota:

• Average upselling/cross-selling monthly revenue potential (per deal) = $5,000
• Number of such deals required to achieve quota = 2 ($10,000/$5,000)

Et Voila! there you have it!

For bottom-up approach: Since sales teams provide input in this approach, salespeople feel encouraged and incentivized to participate in goal setting. Let’s discuss the variables and how to track your progress in this case

‍

Let's assume another set of variables:

• Number of reps on the team  = 10
• Average number of MQLs generated by the team = 1,600
• MQL to SQL conversion rate = 10%
• SQLs to close conversion rate = 25%
• Average monthly revenue from new deals = $40,000
• Average size of a new deal = $10,000
  

Let’s calculate how individual rep needs to perform:

• Average number of MQLs per rep = 160 (1,600/10)
• Average number of deals a rep needs to work on = 16 (160*10%)
• Average number of new deals required = 4 (16*25%)

With an average of 4 new deals in the pipeline, one rep is able to make $40K (4*10K) of revenue. If we consider that a similar amount of upselling/cross-selling can be achieved by each rep (as stated in top-down approach), then a sales rep will be able to achieve $50K ($40K + $10K) in monthly revenue.

Looking for an automated model that can help you track your quota?

‍

Feel fill out the form “Request a demo today” through this link and we'd be happy to share a detailed excel version!

‍

Keywords: Sales, Quota, Track, Revenue, MRR, Growth, Deal, Sales Reps