What is a Sales Quota?

A sales quota is a measurable target that vendors must meet within a given time frame. Any indicator can be used as a base, but the most popular ones are total revenue, the number of closed or won deals, the number of sales activities, or a combination of these.

Sales managers usually set quotas that help the business hit the sales goals set by leadership when they're achieved.

Synonyms

• Revenue Quota
• Sales Target
• Revenue Goal
• Sales Objective

Types of Sales Quota

The sales quota really varies based on the industry you’re in, your business plan, and how you see your growth shaping up. Check out our top 6 recommendations for sales quota models that you might want to consider. 

1. Revenue or Profit Quotas

A revenue quota is a type of sales quota that is frequently used to measure the total revenue targets.

For instance: A furniture manufacturer has set a monthly revenue target of $20,000 for each of its sales representatives. Denise has a list of recent homeowners who might need a bunch of furniture. She needs to sell furniture to about ten customers to hit her monthly quota since her average sale is $2,000 per customer. 

DeAndre works at the furniture showroom. Most of his customers usually want to buy just one piece of furniture. He needs to land deals with at least 40 customers to hit his quota since he typically makes $500 per sale.

2. Activity Quotas

These quotas are based on the number of leads nurtured. Your sales reps must do certain things in order to move a deal from the early stages of notice to evaluation and closing. This includes calling people out of the blue, writing emails, or setting up meetings. 

Companies often set activity quotas when they want to zero in on prospecting to grow their market share with a new product or service.

Example: A roofing company has given its sales representatives a daily goal of contacting 20 potential customers by phone. Following a local trade exhibition, Nancy contacts everyone who completed a raffle form. For every 10 calls, one sale is made using this strategy. 

While Sarah has a random list of names and phone numbers she needs to contact. Roughly one sale is made for every 50 calls she places using this strategy. However, Nancy and Sarah will have met their activity requirement as long as they make at least 20 calls every day, regardless of how many sales they make.

3. Volume Quotas

A volume quota is calculated by how many units a rep sells in total. This kind of quota really helps get teams excited about selling more of a specific product, especially when launching something new. Volume quotas can help clear out extra inventory.

Example: A car dealer gave its salesmen a monthly sales target of ten automobiles to sell. Pedro works in the section of secondhand cars. He's sold ten automobiles, each costing between $2,000 and $10,000.

Ten closed transactions have been made by Tiffany, who works at the new vehicle showroom. The pricing range of the new autos is $15,000 to $40,000. Despite Tiffany's higher income, both Pedro and Tiffany sold ten autos to reach their volume requirement.

4. Cost-based quotas

Cost-based quotas focus more on resources like money or time rather than on revenue when it comes to setting sales targets.

Example: Salespeople at an electronics store are only supposed to spend 20 minutes on a sale. Sandra is employed in the division of laptops. In order to serve the next customer, she has twenty minutes to convince a buyer of the features and advantages of purchasing numerous computers.

5. Forecast quotas

Forecast quotas are based on a salesperson's or a team's past performance. Usually, these are allocated to a group, division, or area. Forecast quotas are often used when a business has been stable over time and steady factors affect sales, like the state of the market.

In these situations, managers can anticipate sales volumes with high accuracy.

Example: A clothes business calculates its net sales for the fourth quarter were $50,000. They intend to grow sales by 10% in the next quarter, so they set a $55,000 quota.

6. Combination Quotas

A combination quota brings together various kinds of sales quotas. Companies often set up this kind of quota when they aim to achieve multiple goals, like boosting market share for a particular product while also maintaining healthy profits.

Example: A recreational vehicle business has given its salesmen a variety of targets to achieve. Rachel will have to give 15 calls a day to those who have provided information on the dealership's website. She also has to sell four RVs a week. 

Additionally, she anticipates making $150,000 in May from the sale of RVs and camping gear.

Tips for Achieving Your Sales Quota

The following tips can help you make sure your sales targets are met:

1. Think Long-term: Even if your manager only assigns you a monthly quota. Try and create an annual quota that will allow you to prospect for future months while constantly hitting your current month's quota.
2. Make a Pipeline: Your "pipeline" is a regular stream of sales prospects, and growing it involves activities like networking, prospecting, and following up with leads. You can predict revenues and set long-term objectives with the aid of a pipeline.
3. Create Urgency Around Your Goods: If a customer feels they need a product right away or that they may miss out on an offer, they are more willing to grab a deal or purchase it. To get customers to act rather than wait, try to explain to them how your service might benefit them.
4. Take Charge of Your Time: To make the most of your time away from the workplace, formulate a plan that maximizes every single day. Think about who else you can see if you have a sales meeting or customer appointment to attend. Set aside a set period of time every day or week to make cold calls.
5. Overcome Your Quota: If you do better than expected, your manager can have an unlimited commission plan or give you bonuses. Reaching your quota and beyond shows your drive and dedication to the business.