What is a sales quota?

How a quota in sales works

A quota in sales works as a fixed target for a fixed period, set before the period starts and measured when it ends. Leadership turns the company's revenue plan into team numbers, and managers split those numbers across sellers by territory, segment or account list.

At the end of the period, quota attainment is the seller's result divided by their quota. As an illustration, a seller with a quarterly quota of 150,000 in new annual contract value who closes 120,000 has reached four fifths of quota. The compensation plan then says what that result pays.

Types of sales quotas

The types of sales quotas differ in what they count, and the right one depends on what the role can control. A closer is usually measured on revenue, while a prospecting role is often measured on the meetings or pipeline it creates.

• Revenue or bookings quota: the value of deals closed in the period.
• Activity quota: calls, emails, meetings booked or opportunities created.
• Profit or margin quota: the gross profit on deals, which discourages heavy discounting.
• Volume quota: units sold or new customers won, regardless of value.
• Combined quota: two or three of the above, each with its own weight.

Sales quota vs sales target

A sales quota is attached to a named seller or team and usually to their pay, while a sales target is often a broader goal that nobody is paid on directly. A company may have a yearly revenue target, a region a quarterly target and each seller a quota that adds up to slightly more than both, so one missed quota does not sink the plan.

A quota is also different from a forecast. The quota says what a seller is asked to achieve; the forecast says what the seller and manager expect to close. When the two drift far apart early in a quarter, that gap is the conversation to have.

How to set a quota sellers believe in

Set a quota sellers believe in by starting from capacity: the accounts in the territory, the pipeline already there, typical deal sizes and how long deals take to close. A top-down number that ignores all of that turns the quota into a guess, and sellers stop treating it as real.

Good practice is to compare the proposed number with what sellers in similar territories achieved before, lower it during a new hire's ramp period and publish the method, not only the number. Changing a quota halfway through a period should be rare and explained in writing.

• Give every seller the quota, the period and the measure in writing before the period starts.
• Use the same definition of a closed deal that finance uses.
• Avoid quotas so high that most of the team misses them every period.