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What is a sales quota and how to set one for your team

What is a sales quota and how to set one for your team

5
min read

For many people working in sales, chasing quotas is a way of life. Setting sales quotas for your team gives you a goal to work towards and can help you keep track of your progress. 

Setting sales quotas can be tricky - you’ll need to take a holistic look at your team and your customer base to determine what’s most realistic. 

In this article, we’ll take a look at what sales quotas are, how to set them for your team, and how you can use Streak to track your sales process and quota directly in your Gmail account. 

What is a sales quota? 

Sales quotas are goals set internally to track sales over a specific period of time. Most sales quotas are set for a quarter, but they can also be set monthly or yearly. There are many different ways to set and measure sales quotas. 

Quotas are typically measured individually. However, a sales manager might have an overlay quota, which would encompass the sales of the team members underneath them. Sales leadership uses quotas to measure performance and to motivate and compensate team members. 

Sales quota vs. sales goal vs. sales target

You might hear the phrases “sales quota”, “sales goal”, and “sales target” used interchangeably, but they actually mean slightly different things. 

While sales quotas are short-term, sales goals are long-term, overarching goals for an entire organization. Your sales quotas are designed to contribute to your overall sales goals. Sales targets are smaller activities and goals for teams to complete rather than individuals. Sales targets also tend to be for a shorter time frame than sales quotas. 

Why are sales quotas important? 

Sales quotas are important for a number of reasons. 

Since they’re often tied to a commission that sales reps earn, they serve as a source of motivation and accountability for individual team members. They help by giving sales team members a frame of reference for the number of sales they should be making in a given period of time so they can make sure they’re on track throughout the month or quarter. 

Sales quotas often inspire reps to work harder and close more deals each quota period, although they need to be realistic to have a positive impact. 

Finally, sales quotas help your team plan ahead for future sales volume. Without sales quotas, it can be difficult to forecast future company performance. 

Types of sales quotas

There are many different types of sales quotas to measure. When deciding how to measure your sales progress, you’ll want to consider which quota structure will provide the most efficient way for your organization to measure progress. 

Some organizations will also set multiple quotas at once for their sales team, which is often referred to as “combination quotas”. This approach can be helpful if your organization is working toward multiple sales goals at once. 

Here are some of the most common quota types that sales teams use. 

Volume

A volume quota focuses on the number of units a sales representative sells in a given period. Volume quotas tend to work best for organizations that sell physical products. 

Activity

As the name implies, activity quotas focus on specific sales-related activities, rather than the sales themselves. For example, an activity quota might require the salesperson to reach out to a certain number of leads or set up a certain number of meetings. 

These quotas are most common for business or sales development reps. SDRs and BDRs focus mainly on finding leads rather than closing deals. Because of this, activity quotas are a more effective way to measure their progress. 

Revenue

Revenue quotas are somewhat similar to volume quotas, but offer more flexibility for sales reps. With a revenue quota, sales reps have to bring in a specific amount of revenue for their organization, rather than selling a specific number of units. 

Revenue-based sales quotas are most effective for reps that sell multiple products at different price points as well as reps who sell subscriptions, services, or other non-physical products.

Profit

Another common type of quota is a profit-based quota. With this type of quota, sales reps must hit a specific gross profit amount or gross profit margin. This encourages reps to focus on big-ticket sales and high-value products. Profit-based quotas also encourage reps to be mindful of material and operational costs and how they affect your bottom line. 

What to consider when setting sales quotas

Determining appropriate sales quotas for your team can be tricky. The right approach will be heavily dependent on your products, your team, and your customer base. Here’s what to keep in mind as you set your sales quotas. 

1. Start by reviewing historical data

To ensure that your quotas are realistic, you’ll need to base them on sales data from previous years. Ideally, your sales will grow from year to year, but historic data will give you a baseline to pull from. 

2. Consider external factors

In addition to your existing sales data, you’ll also need to look at factors that could affect your sales volume this year. For example, performance can vary by location, so sales reps working in different territories might have different quotas. Changes in the economy can also affect your overall sales volume - for example, you might need to set lower quotas during an economic downturn. 

3. Determine the appropriate time frame for your quota

This should depend on your sales cycle. For example, if it takes over a month to close a sale, you’ll need to set quarterly or yearly quotas to give your reps enough time. 

4. Adjust your quotas each year

Market conditions change from year to year, so be sure to adjust your quotas accordingly. Use the data from the previous year to make sure your quotas are realistic. 

How to track sales quotas in Streak

With Streak, your team can track their quota progress directly in Gmail. Streak allows you to manage your sales pipeline by organizing contacts, emails, and other details about a deal from the initial inquiry all the way to closing the sale. 

Streak allows you to track things like products sold, deal size, interactions, and more in your pipelines. Sort your sales pipeline by sales rep and time frame to see each rep’s progress towards their quota. You can even create a formula column to automatically calculate commission for each sales rep, right inside Gmail.

Install the free Streak extension today to try tracking your team's sales right in Gmail. 

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