Sales quotas: what they are and how to leverage them effectively

Sales quotas are the double-edged sword of the industry: they can be seriously motivating or feel too far out of reach for reps.

To find the balance between setting ambitious targets and building a sustainable work environment, sales leaders need a comprehensive understanding of the goals they set for the team and its members.

In this article, you’ll learn about the different types of sales quotas, including examples for each. We also share five tips for setting realistic sales quotas that help you get results while maintaining your team’s well-being.

What is a sales quota?

A sales quota is the revenue or other objective a rep or team must achieve during a specific time period, such as the number of deals closed each month. For some teams, it’s a performance target (e.g., selling a minimum amount of stock), whereas other teams use quotas as sales incentives to earn bonus pay.

Many companies also interchange the terms “sales goals” and “sales targets” to refer to quotas.

Sales management typically sets these benchmarks based on the company’s goal at the time. For example, if a commercial solar panel company wants to enter the market in a new city this year, the sales manager may set a team goal of 100 demo calls and 10 closed deals in the first quarter.

The size of a company and how much it sells also impact quotas. A small business with limited products will naturally have lower targets than an enterprise-sized company that offers thousands.

For example, the overall revenue target by the end of a quarter for a sales team of 10 reps may be $800,000, so each rep will have a quota of $80,000. On the other hand, a startup with only two reps may have a quota of $5,000 each.

What are the 6 different types of sales quotas?

While increasing sales is crucial, solely focusing on this broad target can demotivate reps. QuotaPath’s 2024 Compensation Trends report states that “lack of motivation” is one of several reasons organizations fail to hit quotas.

Including increasing revenue, here are six of the most common types, with examples of sales quotas for each.

1. Revenue sales quota

Revenue sales quotas are goals based on selling a certain amount of products to achieve a set monetary value.

There will usually be one overarching revenue target that managers will divide between team members. However, these amounts will differ depending on the experience of each sales professional.

2. Profit sales quota

Profit quotas are determined by a sale’s gross profit, the amount earned after deducting costs.

For example, if you’re a commercial property developer, you’ll need to consider the cost of your building materials for each sale. You might aim to achieve a profit margin of 20% on each sale, so you’ll calculate the cost of materials, labor, permits and any other expenses and then add 20% to your quote.

Profit quotas may also mean sales professionals can sell fewer higher-profit items (e.g., luxury cars with a higher markup) or more lower-profit items (e.g., basic models with a lower margin) to reach their targets.

3. Forecast sales quota

While many quotas can be individual efforts, sales forecast quotas usually apply to teams and territories to hit within a specific period.

Like general sales forecasting, leaders base these targets on historical data and past performance.

It’s important to note that expecting more from your team each period as the buying pool decreases can lead to burnout and frustration.

Before upping quotas based on past performance, analyze the market and consider whether your team grew enough to support your new numbers.

4. Volume sales quota

Instead of monetary targets, sales volume quotas refer to the number of products or units that salespeople are required to sell within a set timeframe.

While these directly translate into sales, the focus is on the products themselves.

5. Activity sales quota

While all types of sales quotas aim to increase revenue, some are more indirect.

Management determines activity-based selling quotas by the number of sales activities reps undertake within a given period.

While these aren’t directly closing deals, they’re essential to the process (e.g., calling sales prospects, booking demos and scheduling appointments).

6. Combination sales quota

As the name suggests, combination quotas are a mix of different quota types.

For example, sales representatives may have revenue, activity and volume quotas running alongside each other throughout the year.

5 best practices for setting better sales quotas

Poorly aligned quotas can play a large part in rep burnout, demotivation and high turnover. To ensure you’re setting your team up for success, you should align your quotas to an optimized, more effective sales process.

Here’s how to do that, plus more tips for setting better quotas that inspire instead of deflating your team.

1. Create a dynamic sales process

If your sales team is new or still following an informal process, it might be time to approach this critical part of business development with more of a systems-thinking mindset.

The term “dynamic sales process” may seem contradictory, merging the ever-changing “dynamic” with the fixed steps of a “process”. In other words, it refers to set processes that any rep can replicate but are also adaptable, so they can pivot or update when needed.

What this means in practice is that those who manage sales teams should start by mapping out the stages of their process and the sales tactics that enable these.

After that, monitor the wider team’s processes, including what is and isn’t working, and tweak them regularly.

You can do this by holding regular meetings to dissect recent events or workflows and break down bigger, long-term goals into smaller, more achievable targets that you can adapt as and when.

Whenever you change something, ensure your reps are involved in the conversation, get training if needed and receive updates in clear language so they always understand their role and responsibilities. Doing so ensures your team fully understands what they need to do to reach their targets.

2. Improve your qualification process

Working to directly improve your lead qualification process ensures that you maximize the quality of your leads. Doing so regularly means those in your pipeline are the most likely to result in a sale and help your team hit their quotas.

For a lead to turn into a sale, they must choose your company as the best-fit solution to their problems.

You might have entry-level sales reps, often called sales development reps (SDRs), who source and qualify leads for your team, or it might be everyone’s job to bring in a list of prospects. However, it’s not always a case of more leads equals more sales.

Before moving a lead along the sales pipeline, reps should learn:

• The prospect’s potential objections or concerns

• Who all the decision makers are to complete a sale

• The timeframe and process for a buying decision

• Prospect’s thoughts on competitors’ offerings

• Total budget

Qualified leads are a better use of reps’ time, allowing them to be more efficient and potentially close more sales (i.e., hit quota more often).

You can use tools like Pipedrive’s Prospector to sift through over 400 million profiles and find your next new ideal customer. At the same time, Smart Contact Data retrieves extensive personal and contact details to pre-qualify leads with one click.

3. Analyze your strongest sales reps’ quota attainment

Improving your qualification process can make a huge difference. However, it’s also important to look closely at your salespeople and the processes of those who hit quota consistently.

Doing so doesn’t mean pitting reps against one another. Instead, the goal is to improve sales performance as a team and figure out the most impactful activities.

According to our State of Sales and Marketing 2022/23 Economy Review, reps who received support from their manager or colleagues were between 9% to 11% more likely to usually hit their regular sales quota.

Who supported you the most in your professional life in 2022?

Begin by uncovering your strongest reps by calculating everyone’s quota attainment. You can find this sales metric as a percentage with a simple formula:

Different personalities and work ethics thrive in certain industries and environments, so you need all types of people on your team.

Those with the lowest quota attainment may have strengths that lie elsewhere. For example, they may connect better with a certain group of leads.

Reviewing your highest-performing reps’ weekly averages (e.g., emails, phone calls and meetings) and empowering them to share their methods can help those struggling to hit quotas. It’s all about helping each other and improving as a team.

4. Create data-driven quotas

Quotas are often misaligned for a very simple reason: managers set them at arbitrary numbers.

It’s crucial to base any quota on hard data. Give employees context for how you came to that number and explain how you’ll track ongoing team performance.

You can set data-driven quotas with five steps:

• Set the type of sales quota. Choose between revenue, profit, forecast, volume or activity. (Choosing more than one will result in a combination.)

• Choose your approach. Choose whether you’ll divide a collective team quota equally or whether different reps will have varying targets based on experience and potential.

• Set small goals. Setting multiple goals leading up to a big figure can sustain motivation. Determine the minimum number of sales you need to stay in business over a period and note down that number as your baseline (e.g., five sales). Include other goals that would determine a good month (e.g., 10 sales) and a great month (e.g., 50 sales).

• Calculate your quota. While sales quota calculators can be helpful, it isn’t difficult to work it out yourself. For example, you can start by analyzing market opportunities, your team members’ capabilities and past performance to set suitable targets.

• Establish your timeframe. All goal-setting processes should have an achievable period to give your team a fair shot at meeting their quota.

When tracking short-term key performance indicators (KPIs) on the road to

long-term goals, you can use unified customer relationship management (CRM) software.

Our State of Sales and Marketing 2021/2022 report conveyed how powerful these tools can be.

Companies who use workflow automation to maintain sales data and customer notes (likely with CRM software) are more likely to “usually” or “always” hit their regular sales quota than miss them.

Following this template, you and your sales team will feel like you’re chasing fairer, more achievable revenue targets.

5. Give your sales team time to sell

Without realizing it, sales organizations can unintentionally prevent their people from being able to sell.

Many rely on their sales force to both bring in new clients and manage existing customers in the sales cycle.

Small teams are often guilty of this, as each rep manages lead generation, new deals and client success.

To give reps the best chance of hitting quota, they need enough time to do so, but it’s also important to try and avoid burning out your team wherever possible.

When a rep exceeds their annual sales, that doesn’t necessarily mean you should increase their quota for the next year. There just might not be enough hours in the day, and they could reach a saturation point.

A fair, logical sales compensation plan with personal rewards can also incentivize reps at all levels to work harder to meet quota while helping to reduce turnover as a natural byproduct.

Final thoughts

Transforming your sales quota management can be challenging, but the good news is it’s entirely possible.

Aligning your team with dynamic, data-driven quotas and sales metrics ensures everyone is on the same page with the current target and knows their part to help achieve it.

Paired with a robust compensation plan, meeting quota becomes a win-win for management and reps, aligning everyone to reach the same revenue goals.