Let’s begin this discussion by reading Philip Kotler’s version of What is Sales Quota?
‘A sales quota is the sales goal set for a product line, company division, or sales representative. It is primarily a managerial device for defining and stimulating sales effort.’
Today, we will not touch on the foundational discussion on types of sales quotas but discuss a key element - The objective and importance of setting sales quotas.
However, before we take the conversation any further, we’ll direct new sellers and managers to a comprehensive post discussing:
- What is a sales quota?
- What are the different types of sales quotas?
- What can sales reps do to achieve sales quotas faster?
- Killer Strategies to achieve sales quota in 2022
- Have you completed your sales quota yet?
Click on the image below and understand sales quotas. Once you grasp the basic idea of sales quotas, you’ll understand the importance and objective of sales quotas better.
As a company, there’ll be a need to look up to a quantifiable factor that keeps the sales reps on their toes to perform better. And that’s where sales quota comes into play.
Here are 20 objectives and the importance of sales quota that sales leaders must realize:
1. Serves as the dartboard
A sales quota reflects the business goal narrowed into sales goals. A sales professional can estimate the business required to achieve the yearly business goals.
The best time to introduce the targets to the sales rep is at the beginning of the Financial Year or Quarter to give them enough time to align with the goal and start working towards a plan.
2. Reflects overall sales plan
Sales plans for every quarter or financial year are devised and converted into quantifiable numbers to pass on to the revenue-generating teams. Hence the sales quota is created as a result of the sales plan and reflects the overall sales strategy and plan.
Sales quota and the activities are both extracted from the sales plan.
3. Measures the company's performance
The importance of sales quota is best seen in understanding the health of the company and sales reps’ performance.
If the company can achieve the sales quota, then the company's performance starts ascending, and bigger goals are constructed.
4. Measures the sales rep's performance
Similar to the organization’s performance, the quota also helps sales managers gauge the performance of the reps.
Depending on the sales rep's performance, increasing or decreasing the quota is finalized. Achievement of quota is also an important indicator that we’ll discuss in another point.
5. Motivation for desired performance
Sales quota allows reps to look forward to performing better and challenging themselves. Without a target in mind, achievement doesn’t give the desired satisfaction.
As a sales manager, do you worry about your team’s overall well-being and want to keep them motivated?- Just follow these 15 ways.
6. Create healthy competition
High performers achieve sales quota and motivate others to follow the trail. The competition is healthy and keeps everyone on their toes, including the newcomers.
A competitive environment is the best place for new joiners and helps them ramp up quickly.
7. Make the goals obtainable
Every human being needs a target to look up to. Once they obtain the target, they know the goal is obtainable, and there’s scope for progress.
The sales quota is similar and makes goals obtainable.
8. Sense of achievement
Once the sales rep attains the sales quota, the sense of accomplishment is huge and gives a kick to perform better.
The progress is always a starting point for another sales quota.
9. Indicates problems in the sales process
If team members aren’t able to attain the quota and miss it quarterly, the situation is an indicator that something is off with the sales process.
The current process is not suitable for the team or organization’s goal. Or there could be other issues which we can take up in the next sections.
10. Indicates problems in the product/service
One gap that often the quota helps in indicating is the underperformance of the product or service.
This means the prospects are not taking the product benefits too well and are not convinced to make it a part of their organization's new process.
The product and service gap is highlighted to the product team, and thorough feedback is given to enhance the product per customer expectations.
11. Construction of compensation plan
Sales leaders often tie quota achievement to sales compensation.
Even the incentive plans are based on quota fulfillment.
12. Contributes to forecasting for the next quarter and year
Sales teams that achieve their sales targets can forecast more business Y-o-Y. Sales quota makes forecasting easier and more practical for the sales leaders.
13. Creates a benchmark and standard
Sales teams that follow quota systems can form a standard for their company and the industry. The benchmark is shared with other product teams and compared to understand how teams can achieve this benchmark while keeping the majority of the variables the same.
Benchmark setting also results in building and sharing sales best practices.
14. Budget Allocation
Sales quota achievement is also tied to creating a sales budget. The quota achievement will trigger more funding allocated to the sales teams.
15. Market territories are rebalanced
How the sales teams perform and achieve targets also results in rebalancing the market territories. High-performing sales professionals are allotted more challenging territories to penetrate and generate new business.
16. Leaves no room for unproductive tasks
Having a target or goal generally reduces the opportunity to do unproductive tasks.
Quota keeps the seller focused and aligned with the target. Non-core activities are avoided and taken for granted.
17. Task assignment is equal
Quota makes the task assignment fair and just. Sales quota acts as a foundation for decision-making, which doesn’t leave any room for guesswork or prejudice.
18. Better collaboration parameter
Sales quota determines which sellers need collaboration and hand-holding from sales managers. Also, cross-functional collaboration is necessary to accelerate sales numbers.
19. Reduces errors and duplication of work
Sales targets make professionals focused and efficient. The more the target comes near, salespeople keep an eye out for blunders and unnecessary work that can hamper the growth curve.
Every mistake and duplication can cost the seller a lot of incentive money.
Along with the sales quota calculator, an incentive calculator can be created to determine the incentive for your sales team.
20. Offers data for sales coaching
This point is crucial and needs your attention.
Sales quota achievement is not easy and takes effort. Some sellers reach the peak smoothly and make a considerable profit, but others struggle to get even near the number.
Sales coaching is an effective way to help such sellers attain the quota numbers and stay motivated to achieve more.
The sales coaching plan determined from the quota achievement performance is a great way to start and ensures targeted coaching that’s highly effective and essential.
As a closing note, sales leaders must ensure that the sales quota is firmly established and tracked frequently. Also, the organization needs to stress quota achievement and ensure support and resources to attain the sales quota.
Results first, payment later.