7 Best Practices for Planning and Managing Sales Quotas: Boost Your Sales Success
Are you ready to transform your sales quota planning and management?
Sales quota planning and management is a crucial aspect of any successful business strategy. It involves setting achievable targets, determining priorities, and aligning the entire organization towards a common goal. Whether you're a seasoned sales professional or just starting out, having a solid plan in place can make a significant impact on your team's performance and overall success
In sales quota planning and management, it's all about finding the right balance. On one hand, it's an art and reflects your organization's culture, morale, approach, and philosophy. On the other, it's a science of the numbers - historical actuals, plans, prior accuracy and attainment, drivers, assumptions, and metrics. Likewise, there's a balance to strike in regards to aiming high--and striving for increased sales targets -- while also ensuring your team has a clear path to success, both collectively and as individuals.
So, how do you strike right the balance and set a target that moves your team forward--without sinking the team in the process? You can start by following these seven best practices for planning and managing a sales quota process:
1. Involve the Sales Organization in Setting Company Sales Targets
The top-down approach to setting company sales targets is effective and strategic. However, while executive management sets the target as a guide, the sales organization must validate that the organization can actually achieve that target. This is best done by the sales organization exploring how they believe they can achieve the target. This process of wargaming the numbers helps the sales team rise to the challenge and consider multiple paths, investment profiles, and stretch opportunities.
Inviting the sales organization to participate in the process has multiple benefits. It builds credibility and confidence among the team members, drives innovation, and acts as an early warning system for executive management - who may not realize that the target they set is out of line with their organization. And, with a greater understanding of the numbers, sales leaders can better rally their team around the numbers.
On the other hand, when you exclude the sales organization from the process and don't provide context and understanding for the assigned quota, you run the risk of many negative results. This can result in poor morale, missed targets, higher turnover, and more.
2. Have a Clear and Accessible System for Effective Sales Management
A well-defined sales process is key to managing top-down targets and bottom-up quotas. This requires a clear and accessible underlying system (such as a spreadsheet, CRM, or other purpose-built application) along with workflows (such as processes, tasks, a queue, and sign off). Together, your sales systems and processes should allow you to share, collect, collaborate and agree the assumptions and numbers building up to targets and quotas.
A good quota plan should be created with sufficient detail to build confidence. And having a controlled and widely-accessible system provides the level of detail required. It also encourages high collaboration and helps to establish consistency, organization-wide standards, and confidence within the system.
Having the systems in place to show how your organization determines assumptions and standards also eliminates over-simplified approaches such as The Peanut Butter Approach or the old standard “last year plus 10%.”
Ideally, the sales targets and quotas will be further supported by upstream information such as new product launches, marketing investments, activity goals (e.g. calls, meetings, demos) so the entire sales cycle is discussed, agreed and measured, beyond the sales organization to supporting teams.
3. Add Upstream Depth to Your Quota Plan with Market Insights
Maximize your plan's potential by including market analysis in your sales quota planning process. Not all markets, regions, and products are created equal. So if your plan accounts for more data points or dimensions, such as market, geography (e.g. country, region, state), product and account (e.g. number of potential customers) you'll be able to provide additional insight, create a more accurate plan, and avoid a lot of frustration among your sales team.
Not sure where to start? At a simple level, you can begin with a few data points from your CRM data, including number of customer and prospect accounts, leads, sales activities, and marketing indicators to gain insight into market potential. Over time, add more data points to improve your sales quota accuracy and provide your sales team a clearer path to hitting their respective quotas.
This can enhance territory planning, sales quota confidence, and drive marketing efforts.
Tip: If your team's individual quotas seem fairly unbalanced, and you suspect it could be due to market factors which you're not sure how to take into account, one approach is to expand your quota beyond revenue to include activity-based goals for sales reps and supporting teams. This could help you identify material gaps and imbalances from the market, beyond your team's control. And you can use that information to adjust territories, quotas, and rebalance a future plan.
4. Make a Point to Go Back and Balance Top-Down Targets and Bottom-Up Sales Quotas
Striking the right balance between top-down targets and bottom-up sales quotas is crucial for a successful sales process. Sales quotas should challenge reps but not become unrealistic. A clear, well-defined process and a motivating compensation plan can help maintain this balance.
However, when quotas become unattainable, it can lead to negative consequences. It's important to adjust and rebalance as needed using real data to ensure a healthy sales environment. Repeatable processes and regular adjustments will keep sales quotas in line and become a standard part of sales operations.
5. Assess the Health of Your Quota Plan with Historical Data
Health tests for sales quotas often involve comparing past performance to current trends. Reviewing recent and historical data (1-3 years) can give insights into the realism of the sales quota and its level of stretch. This includes evaluating the team's prior performance, market conditions, and the speed of growth.
When past performance aligns with the new sales quota goals, the sales organization feels more confident in the numbers. However, when the situation has changed (due to new products, markets, or investments), a clear plan to support the quotas is necessary.
Regardless, it can be helpful to consider "right now" performance to avoid recency bias. Sales reps will compare their quota to their current year performance, so it's important they see a clear path to achieving and exceeding the numbers. A successful sales quota process must provide this understanding.
6. Manage Your Sales Pipeline
A sales pipeline is crucial for sales reps as they plan for future sales. They evaluate expected sales by referring to the pipeline and potential changes in territory. A healthy sales process includes pipeline coverage, conversion rates, and reps' own outlook.
Testing the pipeline regularly is a key health check. By evaluating current pipeline, expected activity, and conversion rates, organizations can determine the feasibility of allocated sales quotas in the near future. If there's a gap, presenting the plan to fill the pipeline will help address it.
However, consistent pipeline management is crucial. Inaccurate pipeline leads to sales process problems and requires quick resolution. Sales Hacker suggests six best practices for pipeline management.
Uncontrollable events, such as economic downturns or competitor launches, may require adjusting sales quotas to reflect these changes.
7. Set Aside Time to Invest in Your Sales Quota Process
Setting accurate sales quotas requires collaboration and proper allocation of time. Executive management should share their sales and coverage targets with enough lead time for the sales team to run the numbers and reach a final quota. But if the sales organization rushes the process, the results can be negative:
- Dictated quotas instead of collaboration
- Delayed quotas and compensation plans
- Uncertainty instead of clarity
All these outcomes disrupt the sales team and decrease their chances of success. Investing time in a solid sales quota planning and management process leads to a stronger and more aligned sales team, focused on achieving the numbers. Avoid the pitfall of last-minute planning and invest in a process that yields certainty and success.
Balancing the Art and Science of Sales Quota Planning
In conclusion, setting and managing sales quotas is an essential part of any successful sales strategy. It involves finding the right balance between art and science, striking a balance between aiming high and ensuring success. By following the best practices outlined in this blog post, you can create a solid sales quota plan that drives your team forward and supports their success. To simplify this process, consider using Arithmix's Quota by Rep Template, which provides a step-by-step guide for creating a comprehensive and effective quota plan. Whether you're a seasoned sales professional or just starting out, taking the time to plan and manage your sales quotas is an investment in the future of your organization and its success.
