The Sales Leader’s Guide to Setting Realistic Quotas
Like staring up from the base of a mountain and imagining the peak of it, sales leaders set quotas they want their reps to reach. However, in some cases, they aim too high and above a doable target, and what results is that they don’t just get the numbers wrong, they can cause serious harm to the organization and its sales reps.
A common practice, but one that can wreak havoc on a sales team, is setting quotas calculated according only to the prior year’s revenue—in other words, based on a reasonable estimated rate of growth. However, this method often proves less than accurate, because it overlooks key variables that influence the yearly growth, like increased competition, market fluctuations and opportunities, new product launches, and expansion into new markets. When those influencers are not in the mix and a goal is based solely on projected growth, it will increase the likelihood that your individual sales contributors are set up for failure and result in a loss for the company.
The Downfall of a Too-High Goal
When you take a narrow view and look only at growth, you run the risk of causing everything from losing credibility, morale and overall loyalty.
When taking aim at the moving target that is sales quotas, also pay attention to the following best practices:
A Snapshot of Opportunity
There are no truths across the board for businesses—every industry is different. So what does opportunity look like for you in the marketplace? Depending on the goods and services you offer, you will face challenges that are particular to your line of business. For example, seasonal fluctuations are tough for some businesses.
Depending on your business and target customer demographic, you could be challenged by prolonged sales cycles. Take a holistic view of the entire year in order to account for any future stumbling blocks. Anticipate what obstacles might come into play. Don’t let yourself be blindsided by sudden difficulties, but instead work those possibilities into your quota equation,including the lifecycle of your goods and services. In this quickly changing world, the best laid plans allow for a variety of setbacks.
Don’t Just Live in the Economic Moment
Again, the world is changing. We’re living in uncertain times. Expert opinion on the domestic and global economy can range from healthy to dire, depending on your sources. In setting your quotas, look at things from a local, domestic, and global perspective.
Politics is linked with economics, of course, so it’s also crucial to look at how the current political climate is inspiring or slowing consumer spending; how it’s driving emerging businesses; how it’s curtailing growth; and so on. Also consider the volatility of emerging markets, the introduction of new trade tariffs, or the implementation of new sanctions.
It’s a lot to consider, but in looking at all these contributing factors, and some that may occur at a later time, you’ll be able to project revenue and set quotas with better precision.
Let Feedback Feed Your Numbers
Finally, ask for and be open to receiving input from those with their boots on the ground—your sales people. The reps are your ears and eyes; they’re out there in the field every day and working the phone lines. Pay attention to their objections to your quota expectations, and listen when they bring up marketplace variables you hadn’t thought to include in your overall projection picture. Hard data is obviously valuable, but of equal importance are direct, frontline insights from those who have the ear of the customer.
We’ve just dropped a long laundry list on you sales leaders, but we also know that good leaders love a challenge—and a well-deserved reward. Doing your due diligence upfront, before you set your quotas in stone, will position your sales people and your organization for success. It will also provide you with an increased level of calm. Let chaos reign with your competitors. In this sometimes unpredictable profession, it’s always better to be in as much control as you can.
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