How to Set Sales Quotas

Why do you need to set sales quotas? 

Well, think back to the olden days for a second. When you had to get somewhere by car, you’d use a combination of signs and a map to navigate – and a bit of blind hope that you were 1) going the right way and 2) would get to where you needed to be in time.

Well, making sales without a sales quota is a bit like that. Sure, you’ll probably get to where you need to be, but it’s likely to take a bit longer and involve a couple of wrong turns along the way. 

That’s why sales quotas – specific targets assigned to a salesperson or team to achieve within a set time frame – are a wonderful thing. They provide structure, motivation, and alignment with company objectives, making sure that individual efforts contribute to broader business goals. 

Today, we’re going to set you up for success when setting sales quotas: what types there are, how to set them, how to manage the journey to your goals, and common pitfalls to avoid along the way. Here’s what’s coming up:   

• Types of Sales Quotas
• Steps to Setting Effective Sales Quotas
• The Road to Hitting Sales Quotas
• Common Potholes and How to Swerve Them

Think of this blog post as your own personal GPS on the sales quota-setting journey. Put your seatbelts on, and let’s go.

Types of Sales Quotas

First things first, what is the best type of sales quota to set? In short, the answer depends on your unique business – but broadly speaking, it’s something that best fits in with wider business goals. 

For example, if your growth strategy focuses on getting a large amount of small- or mid-size businesses on board, activities such as number of cold calls made might be a good quota for the SDR in your team. 

If your business is more enterprise-focused, sales revenue generated might make more sense. 

Let’s take a look at the different options out there: 

• Activity Quota: this focuses on specific sales activities completed, such as the number of calls made or meetings scheduled.
• Volume Quota: for example, the number of units sold within a given period.
• Revenue Quota: centers on the total sales revenue generated.
• Profit Quota: emphasizes the profit margin, to keep your business efficient. 
• Combination Quota: ties together elements from multiple quota types to provide a comprehensive performance metric. For example, you might have a quota of a set number of deals worth a minimum revenue number. 

Next up: how do we go about setting an effective sales quota?

Steps to Setting Effective Sales Quotas

We’re not engineers, but we’re pretty sure a lot goes on behind the scenes in that GPS of yours. The same goes for setting sales quotas – you should follow a well-thought-out process to keep yourself on the right path: 

Assess Historical Performance 

First things first, you need to take a look at your business’s historical performance. What’s worked well in the past, and what hasn’t? Your sales quotas should be based on strategies and activities you know work well – otherwise, you’re setting goals on shaky foundations. 

Spoiler: having to change sales quota halfway through the month or quarter isn’t going to reflect too well on you, and doesn’t do wonders for team morale either. 

Understand Market Conditions

Sales quotas don’t exist in a vacuum – so they shouldn’t be set in one, either. If the industry’s in a tough spot then now’s maybe not the time to set higher quotas than ever before. 

Likewise, if you believe that now really is the time to go hell for leather on your goals, then do it. Your industry might be receiving record levels of funding (just think about AI products in the last few years, for example) or maybe a new rule or regulation means there’s suddenly a huge need for your product. 

Align with Business Goals

Make sure your quotas support the company’s overall objectives and growth plans. There’s just no point in setting something that’s wildly out of sync with where the business needs to get to – like driving in totally the wrong direction, if you will. 

Consider Team Capacity 

Only 60% of sales reps meet their sales quota – and that’s not necessarily because only 60% of sales reps are good at their jobs. The most experienced, talented sales professional might struggle to hit a crazy quota if they’re the only one in the team – or perhaps you have a group of eager newbies who will need a quarter or two to ramp up to full potential. 

Keep the skills and experience of your sales team in mind when setting targets – otherwise, you’re just setting them up for failure. 

Choose the Appropriate Quota Type

This one’s pretty simple: choose the sales quota type that best fits your business model and sales strategy. Why would you even try doing anything else? 

Include Both Top-Down and Bottom-Up Approaches

This is how you hit business goals and develop your team at the same time. If, say, you need to make a high volume of cold calls to hit an SQL quota, and you’ve got a new SDR who needs to improve their cold calling skills, you know where to focus their individual targets. 

Engage Sales Reps in the Quota-Setting Process

If you set targets out of the blue, you might be on the receiving end of a little resistance or pushback. Involve your team in the process, and they’ll understand where that intimidating number is coming from – and be more engaged and motivated from the very start.

The Road to Hitting Sales Quotas

Think you can just set your team’s quotas, and be done with your job for the quarter? Lol, as if. Setting sales quotas is just the beginning – next up, you’ve got to actually help them get there. 

Monitor Progress Regularly

Keep track of activities being made and outcomes to make sure targets are being met. For example, if you have a cold call quota and none get made in one week, you’ve got a problem. 

Equally, if 500 cold calls get made in a week but absolutely none of them result in a meeting, you’ll need to review how these calls are being made and how you can tweak the approach.  

Provide Support and Resources

Continuing on the same theme: make sure your team members feel supported and have the tools, training, and resources they need to achieve their quotas. There’s nothing worse than being given a number and not feeling equipped enough to get there – show them how you’d do it yourself, and direct them towards tech or content that might help. 

Adjust Quotas as Needed

If the economy suddenly tanks, or you hit your quarterly target after a month, you’re going to need to adjust your quotas. This makes sure you strike the balance between keeping team morale high without letting anyone get complacent. 

Common Potholes and How to Swerve Them

So far, so simple – right? Wrong – anyone who expects the road ahead in sales to always be straightforward is about to have a nasty surprise. Keep an eye out for these common problems to keep your team on the straight and narrow: 

Setting Unrealistic Sales Quotas 

The only worse feeling than not hitting a ridiculous target? Being set a ridiculous target, and knowing for a whole month, quarter, or year that there’s no way you can possibly make it. 

Set an unrealistic target, and you’re tanking team morale before you’ve even begun – which can lead to disengaged employees, poor retention rates, and *spoiler alert* quotas being missed. 

Lack of Alignment with Business Objectives

Set a quota that’s not aligned with business goals, and you’re not getting the business where it needs to be. Imagine that every single person on your team smashed their quota, but the quota was aligned with objectives from two years ago.  The business would be in trouble, right? Right.  

Inadequate Communication

This really starts from the sales quota-setting work you’re going to do with your team, not for your team. Open up lines of communication from the very start, and you’ll be able to address any concerns and provide clarity where it’s needed. It’s far better to know what your team is thinking at all times (ok, maybe not all times), rather than to be hit with a bombshell two weeks away from your deadline.

Let’s Wrap It Up!

Getting around in the olden days sounds pretty exhausting, right? 

Right – as does trying to work in sales without having sales quotas to hit. Start by choosing the right type of metric to chase, carefully consider the team, business, and market conditions you’re working with to choose the actual number, and then keep a careful eye on the road to reaching them. 

You’ll be hitting your sales quota before you know it – and steering your business in the right direction as a result. Don’t forget to take a rest stop and reflect on all your hard work, too. 

FAQs About Setting Sales Quotas

What Are Sales Quotas?

Sales quotas are specific targets set for sales teams or individuals to achieve within a certain time frame. These targets help align individual and team efforts with broader business goals. Common types include activity quotas (like the number of calls made), revenue quotas (like sales revenue generated), and volume quotas (like units sold). By setting quotas, businesses can structure their sales efforts, track progress, and motivate teams to perform consistently. 

What Are The Different Types Of Sales Quotas?

There are several types of sales quotas, each tailored to different goals:

• Activity Quotas: focus on actions like calls made or meetings scheduled.
• Volume Quotas: track the number of units sold.
• Revenue Quotas: measure the total sales revenue generated.
• Profit Quotas: emphasize profit margins above all else. 
• Combination Quotas: blend multiple types of quota for a more holistic approach. Choosing the right type depends on your business model and objectives – whether you’re prioritizing growth, efficiency, or revenue.

Why Are Sales Quotas Important?

Sales quotas are essential because they provide direction, accountability, and motivation for sales teams. They also make sure every effort contributes to achieving business goals, as well as helping team leaders measure success, identify performance gaps, and encourage continuous improvement.

How Do You Set Realistic Sales Quotas?

Setting realistic sales quotas requires a mix of data analysis and thoughtful planning. Start by reviewing historical performance to see what’s worked in the past. Next, consider market conditions – are you in a growth phase or facing challenges? Align quotas with broader business goals, and make sure they’re achievable given your team’s size and experience. Don’t forget to involve your team in the process; their insights can help create targets that are ambitious but realistic, and make sure they’re engaged from the beginning. 

How Can You Help Your Team Hit Sales Quotas?

Helping your team hit sales quotas starts with regular progress monitoring. Check in on key activities (like calls or meetings, for example) to identify any problems early. Provide resources like training, tools, or content to support their efforts. Open communication is really important; give feedback and offer guidance when needed. Lastly, be flexible. If external factors shift, adjust quotas to maintain morale and motivation while keeping the business on track.