What is a Quota?
“quota is a fixed share of something that a person or group is entitled to receive or is bound to contribute”
In general per Google;
In sales, a quota, also known as a goal, or target, is the amount a salesperson must sell to receive a commission for a specific period. Setting a target helps you evaluate the performance of the company and its employees. A sales quota can be on a monthly, quarterly, or daily basis depending upon your organizational structure. To put it simply, it’s the flame on top of a mountain symbolizing destiny and guiding sales reps to find a way to reach it.
Advantages to Setting A Sales Quota
Over the years, organizations have designed and tested multiple theories to help their sales reps bring in more revenue; that perpetual search for new techniques continues. Motivation is the cornerstone of the search and a motive that feels good and sustainable to the sales rep is key. Of course, a compensation plan must not only favor the employee but also the employer. Remember the days when your dad promised chocolates if you did well in school? – This is exactly how it works.
Allotting a quota helps the cause on various grounds; knowing what you have to achieve assists you in designing your plan of action. Let’s discuss a few benefits of having a defined quota for your sales team.
Facilitates In Planning Growth
Quotas help control the scaling of your business by deciding a sales quota; you can estimate the revenue of a particular period, and by determining that, you can predict your growth.
Once you have the numbers to determine the amount of work and resources needed, you’ll be better prepared to create a system to generate more productive results.
Promotes Solution-oriented working
When your paycheck is dependent on the attainment of your quota, you’re motivated to overcome hurdles and consequently find workable solutions to keep the sale process running optimally.
Identification of a problem is crucial but suggesting a solution to it is what makes you a valuable contributor to the organization.
“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.”
After the industrial revolution, a large portion of the population worked to achieve more and more by revisiting their goals after every achievement. This goal-oriented mindset helped organizations a great deal, and those who adopted it are reaping the benefits. Similarly, for better On-Target Earnings (OTE), sales reps initiate ideas that prove highly beneficial, so much so that they become the organization’s practice.
It’s pretty clear, that incentivized sales propositions are constructive and work as accelerators, but at times they can be decelerators if played falsely; A manager’s role is keen on keeping the quota, which is favorable for both; the organization and the sales rep.
Types Of Sales Quotas
Sales quotas are designed based on what a company wishes to attain such as: selling more products, generating more revenue, and/or earning maximum profit.
Revenue Oriented Sales Quota
A sales rep is assigned a quota to generate revenue, a specific number in the allocated time. For example, you have asked the sales rep to produce $1000 revenue in a month, so that’s the quota he needs to attain to be eligible for the bonus.
Forecast Oriented Sales Quota
Best works for a new launch, be it expanding into a new territory or introducing a new product, the quota is set based on prior research and data.
Profit Oriented Sales Quota
It is similar to the revenue-oriented quota. The only difference is the measuring metric; in a profit-oriented sales quota, you assign an amount of profit that a specific sales rep must earn for the organization.
Volume Oriented Sales Quota
Volume refers to the number of units; in the pre-SaaS era, volume-oriented sales quota was in trend; you needed to sell a defined number of units to attain the Sales Quota.
Activity Oriented Sales Quota
It is a preferred quota system for managers, where a To-Do of activities is drafted and assigned daily; you must perform all the activities efficiently as many organizations ensure quality with quantity. For example, in SEO, you assign some backlinks that need to be made by an individual guy, so he must find quality relevant sites to reach that number, not just any website.
At times companies create a combo, mainly of activity-oriented quota and profit-oriented quota to help the employee equally focus on both; getting sales and performing sales & marketing activities effectively.
Serve The Preferred Dish
If you set a Quota too high to be realistically attainable, you are at war with the reps all the time and you might end up losing resources. By setting an extremely low sales quota, you’re commission expense will be disproportionately high to the value it brings.
Keep the balance so the employee and employer both are satisfied and work in sync to ensure scalability.