Explaining Sales Quotas - Definition and Types

Explaining Sales Quotas - Definition and Types

Anirban Banerjee
Anirban Banerjee
April 10, 2022
5 min read

"A goal is a dream with a deadline." - Napoleon Hill

A bad day at work can take a toll on sales reps. It can either make them question their profession and place in the current workplace, or it can make them set unrealistic goals (dreams without deadlines) and unattainable sales quotas - to quickly make a comeback. This either leads to a lost sales executive for the sales organization or yet another bad day at work for the sales reps. 

On one hand, setting sales quotas is a S.M.A.R.T. (Specific, Measurable, Attainable, Realistic, and Timely) way to drive higher conversion rates and revenue, and ensure fair compensation plans. But on the other hand, unrealistic sales quotas can lead to toxic work culture and increase the costs of rehiring and training. 

So, the challenge is to consider all the revenue-impacting factors and combine them to set attainable sales quotas. This article covers that, and various types of sales quotas that you can set for your sales team members - with definitions, examples, and pro-tips. 

However, if you’re wondering how to get authentic sales information to derive accurate numbers for sales quota setting, you’d have to calm your curiosity with just two words for now: “sales intelligence.” More on that later! First, let’s get a clear definition of what sales quotas are and why you need them.

What are sales quotas?

Sales quotas are the checkered flags held by sales managers to mark the destination for their sales reps - as the managers hold the stopwatch. The finish line represents various time-sensitive sales goals such as the number of deals closed, accounts renewed, products sold, etc. 

Why do sales teams need sales quotas?

A CRM provides 360º visibility into each sales rep’s deals – from quantity to quality. These details can easily be analyzed and tracked on the dashboard, along with the sales performance of the salespeople and their corresponding revenue figures. Then why do we need sales quotas?

Basically, to have a metric against which you can track and analyze your sales team’s performance, and your organizational revenue goals. Goal attainment further helps sales organizations in these ways:

  • Gives sales reps motivation and a target to shoot for - to close more deals and boost the ROI
  • Provides insights to sales managers for performance review and compensation plans
  • Highlights sales rockstars and replicate their selling methods that work 
  • Helps you identify the gaps in the sales pipeline to further dig-in for course-correction 

Sales Quota vs Sales Goals

Sales Quota

  • Metric-driven, time-sensitive targets set for a specific time period
  • Revenue-impacting metrics are leveraged to set sales quota
  • Example: Increasing the sales of upgraded product by 110%, as compared to the sales of previous version

Sales Goals

  • Long-term organizational target to be achieved over a longer period of time
  • Sales quota attainment is driven to achieve sales goals
  • Example: Improving sales for newer versions of products over time

Common types of sales quotas (and how to set them)

Your leadership team might have shared a long list of sales goals to achieve in one of your recent sync-up meetings. Those goals could come in such forms and shapes:

  • Increasing marketing penetration in existing locations
  • Improving the conversion rate for enterprise-level prospects
  • Driving more efforts for selling products A, E, and G

Just as the figures and metrics relating to these different goals vary, you need to hit different types of sales quotas for each of them. What are those? Let’s dive in!

Revenue-based sales quota: cha-ching, cha-ching!

Sales revenue quota

Sales revenue is the amount of revenue generated from sales over a period of time, and your sales reps are the ones who bring in that dollar amount. It’s the sales team’s most basic goal to set sales revenue quotas for generating more revenue next month or quarter. For example, each rep on the team has to bring in at least $10,000. Or, each rep needs to increase their sales revenue by 6% for every subsequent month.

When to set sales revenue quota?

Set a sales revenue quota for your sales teams when they are thoroughly familiar with the buyer persona for the product you want to sell, and you just want them to scale up with time.

Profit quota

When you want to supercharge your profit margins in your ledger CRM, give your sales reps a profit quota to hit in a realistic timeframe. It differs from the sales revenue quota because here you’re aiming to improve the profit you’re making by selling your product(s), rather than the overall revenue. 

When to set profit quota:

  • You can set a profit quota for a particular product that you think could reap you more gold with its potential or a better sales strategy
  • To sell SaaS products, sales and marketing efforts can seem like an uphill battle and be heavy on your wallet, increasing your Customer Acquisition Cost (CAC). You can set attainable profit quotas when you have a high CAC and are looking to hit the right Lifetime Value (LTV) / CAC ratio.

Forecast revenue quota

Let’s say you’ve rolled out an upgrade of your SaaS software and you want to forecast the revenue you would generate from the deals closed or up-sells in the coming quarter. How do you approach this? By deriving a forecast quota for the next quarter, based on the revenue-impacting factors for the last quarter. 

For example, you already know a percentage of your existing customers have been waiting for this product update, and you already have hundreds of leads to assign to the star performers in your team - you can forecast a 125% increase in the sales revenue as compared to the revenue made in the last quarter.

With an accurate forecast quota, you will be able to align your sales efforts in advance. For example, you can analyze the historical performance of your sales reps and choose which salespeople you want to put on most deals to close them - to hit the forecast quota. 

Pro tip: Do not base your forecast on just ANY data. Accuracy is everything here. Use accurate historical data and make good use of your CRM. You can leverage sales intelligence and analytics tools (like Wingman) to factor in the green and red flags in your historical data and call recordings - that you would have otherwise missed.  

Combination sales quota: sales metrics making allies

This is more of an approach towards setting sales quotas than a type of sales quota. It basically runs on “the world is your canvas” maxim for sales managers. In better, sales-y words, when a certain sales activity is influenced by various sales factors - you can combine those factors to set a final sales quota. This, my friend, is a combination sales quota, which combines multiple metrics and several sales woes. We’ll explore when and how to set one for you in the following sections. 

Volume-based sales quota: sell, sell, sell wisely

It's popping right on the screen what volume-based sales quota means - as you read the term. Do you want to turbocharge your sales? Fine, sell more. However, realizing the fact that you’re still reading, you know there’s more to it. 

But, basics first!

Your sales reps are required to close a certain number of deals for a given time period. For example, you can ask all the salespeople on your team to close five more deals in the next month, increasing the number by two more deals for every subsequent month in the next quarter. 

Status: Lesson 0 - completed. 

The “there’s more to it” part:

The dynamics of SaaS products have changed in the new-age tech-world. You can’t sell a platform with just one feature. That’s not what the customers are looking for; they want the whole package. There are multiple levels of feature offerings, subscription levels, and product plans that you need to factor into your volume quota. Based on that, you can further expand your angle to set these volume-driven sales quotas:

Differentiated volume-based sales quota 

Let’s picture a scenario: your sales reps actually take sales quotas seriously, and you’ve already drilled them to achieve better results for the next quarter. Now, they’re doing the most they can in the least amount of time for quota attainment - by selling more and more low-value products. 

Here’s the list of bullets this would shoot:

  • Reduction in the profit margins 
  • Lower number of future product up-sells
  • Being positioned as a low-value seller in existing/new markets

Game plan for setting smart volume-based sales quotas:

  1. Differentiate the products/subscriptions that bring you high, medium, and low value. For example, diamond plan > platinum plan > gold plan.
  2. Now, set the sales quotas for each of the subscription plans separately. For example, salespeople need to sell at least five diamond, seven platinum, and eleven gold plans. 
  3. Action!

Persona-driven volume-based sales quota

Let’s say you used to sell your SaaS platform to corporate offices, but now with digital transformation in the education industry, the market is growing to include educational institutes and remote employees.

Now, you find it a profitable idea to penetrate these new markets, your buyer personas are college and school-going students, and employees working remotely or in hybrid workplaces.  

Your goals are:

  • To sell to new customers and markets
  • Sell high volumes to increase market penetration

Time to bring the combination quota into action

This is where you set the persona-driven volume-based quota for achieving the two revenue targets stated above. For example:

  • For educational institutions, you can combine the revenue quota with the persona-driven volume-based quota to sell your premium, enterprise-grade plan 
  • For the solo remote workers, you can do the same for your single user, basic plan

Activity sales quota: the savior in disguise

If you cut the pie of volume-based or revenue-based sales quotas into smaller effort-based slices, you’ll find scrumptious sales activities. Activity sales quotas such as the number of sales calls or up-sells ensure the sales team’s progress for the whole quarter - rather than just when the quarter is about to come to an end, and it’s time for sursalesprise! 

On one hand, some seasoned sales reps might see activity sales quota as micromanagement. But it can help sales leaders identify coaching opportunities based on the activity quota that the sales reps are missing. They can then coach or train their sales reps, and follow up with them along the way so as to meet the bigger sales quotas.

Eternal questions in a spotless sales mind:

  • How do I identify where my sales reps are lagging from a million of their sales phone calls?
  • Is there an option to combine the granular data from sales calls with the data from CRM?
  • How should the salespeople improve their sales skills for quota attainment?

….and the list goes on.

Looks like you need a Wingman (and the answers to those questions)

Our sales intelligence software, Wingman integrates all your sales data such as sales call recordings, CRM, communication channels like Slack, dialer, calendar. It then uses artificial intelligence to sift through multitudes of sales data and distills it into actionable insights that you can successfully leverage for sales quota attainment. 

With its quick click-based workflows, Wingman helps sales teams attain their sales quotas in multiple ways:

  • It delivers notable sales metrics and personalized insights into sales calls, such as competitor mentions, objection handling techniques, calls’ duration, talk:listen ratio - to analyze sales calls for skill improvement and performance reviews. 
  • It gives live alerts and delivers cue cards for assisting the sales reps on calls with valuable information such as how to handle an objection, how to respond to a competitor mention, and when it’s time to take a pause and listen to the prospect.

As your Wingman, it strives to ease your sales worries and hit your sales quotas with data-driven ways and powerful intelligence. To boost your revenue by hitting S.M.A.R.T. sales quotas within the right timeline, book a demo with us today!

In this article

Liked this article?

Subscribe to our newsletter and stay up to date.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Related articles