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Most organizations begin the 2023 Quota-setting process in the 4th quarter.

Sales Quotas are an imperfect sales management tool, and the quota-setting process has its share of drama, “horse-trading,” and “hand-to-hand combat” with the finance team.

We run through the process yearly, hoping that quotas will yield reliable results and that sales and finance will celebrate. Not!

Follow these five essential elements to improve the sales quota setting process:

 

#1: Sales Quotas = Accountability. Sales quotas force performance accountability and offer a framework for sales planning conversations and coaching.

 

Don’t set sales quotas so high they are unattainable (not fair to the salespeople), and don’t set them at a level where 90% of your team will hit quota (not fair to the company).

 

#2: Don’t Set Quotas to manage Compensation. Quotas should be a function of company revenue or booking goals, the number of salespeople, and the market or customer opportunity for growth.

 

Compensation is a separate conversation that often distorts quotas over time, particularly with many tenured salespeople. Don’t modify quotas to adapt to compensation targets, as distorted quotas become disconnected from financial goals.

 

#3: Apply Sales Potential To Quotas. “To whom much is given, from him much is expected.”

 

Suppose you have a salesperson selling computer servers to Amazon as an assigned account. In that case, she should have a much higher quota than salespeople with a smaller or lower growth account or prospect base.

Tenured salespeople tend to end up with the most prominent accounts, yet we often see their quotas on par or negligibly higher than their team members with smaller accounts or books of business.

Higher growth accounts should come with higher quotas for the assigned salesperson than their peers.

 

#4: Don’t Play the Quota Credit Escalator Game. The thorniest compensation and quota tracking problems happen when someone decides to give more than 100% sales quota on a deal or give multiple salespeople quota credit for the same deal.

Compensation software companies love this type of plan because they know it hurts your brain to explain the compensation plan, much less track the compensation. A best practice is to split quota, but never allocate more than 100% quota, period.

 

#5: Ask Someone From The Outside To Help Set Quotas. Striking the right balance between sales and finance is complicated in most companies, and the spoils often go to the party with the most influence with the CEO.

 

Getting help from third-party tempers the emotion out of the process and has a better chance of striking an ideal balance between the interests of sales and finance.

 

Quotas are just as often wrong as they are correct; however, strengthening the quota-setting process boosts confidence that quotas are pretty balanced between sales expectations and company goals.

Why not try a different approach to set quotas this time around?

 

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