Sales quotas are part of every selling environment. These goals or benchmarks give teams or individuals something to aim for. Sales quotas usually involve a period of time, whether it’s a monthly, quarterly or annual quota. Quotas are important because they give people something to shoot for instead of just aimlessly making sales without heading in any particular direction.
Some people have a misconception that there’s only one kind of quota, notes Luiz Cent, the head of sales at Mailshake. In reality, though, many types of sales quotas can be set for your team depending on your specific goals. In this issue of Promotional Consultant Today, we share Cent’s thoughts on five types of sales quotas you can set for your team.
1. Forecast quota. Just like it sounds, this quota forecasts what an individual or team should hit by a determined date. In high-performing teams, the target will increase period-over-period as the team continues to improve, says Cent. Keep in mind that forecast quotas can vary substantially between team members since they are based on historical performance.
2. Profit quota. Typically, less common than forecast quotas, profit quotas examine the profits of an entire sales team. They set a target for how much profit a sales team produces, which can be measured by subtracting the cost of the goods sold from the revenue they produce, explains Cent. One unique feature of this quota, he adds, is that it is independent of volume. If one sales rep can sell the same product for a higher price, they will need to sell less product to meet their quota.
3. Volume quota. Think of this kind of quota as the opposite of a profit quota. This quota is based on how much product an individual or team sells. Cent says a volume quota can have pros and cons. If one sales rep sells their 100 units at $10 each and another sales rep only sells them for $7 each, it looks like they are both hitting their quota. That’s why this kind of quota is best for products with a fixed price instead of those that can be adjusted.
4. Activity quota. Cent points out that this kind of quota focuses entirely on the activities that lead up to a sale. Activity quotas are best for businesses with longer sales cycles, he adds. You could set an activity quota for things like emails, phone calls and meetings.
5. Combination quota. Not all quotas need to measure the same thing. With a combination quota, you can combine different types. For example, you might establish an activity quota with an added profit quota. An individual needs to make a certain number of calls and make a set profit by a defined date. Or, it might make more sense to combine an activity quota with a forecast quota. Mix and match according to your team’s or organization’s specific goals.
Whatever kind of sales quotas you set for your team, remember that they should be achievable and motivating. With the right mix of quotas, you can inspire your sales team and drive better results for your organization.
Compiled by Audrey Sellers
Source: Luiz Cent is the head of sales at Mailshake.