If your company isn’t selling the products or services it should be, it can pose a huge problem. Not only will this impact your revenue, but it can also reflect poorly on your brand. To get a handle on this problem, it might be time to revisit your sales quotas. Having realistic, achievable, and effective sales quotas can make all the difference in meeting your company’s sales goals.
Sales quotas should be set with care. If they’re too high, your team will become discouraged. If they’re too low, you won’t reach your full potential. To find the sweet spot, consider these tips from Mark Stiffler, Optymyze expert and founder.
1. Know Your Numbers
Before you can set sales quotas, you need to know your numbers. Clearly understand your company’s sales data, historical performance, and current trends. This information will help you set quotas that are achievable yet challenging.
Past Revenue and Sales Volumes
Before you can set an effective quota, you need to understand your company’s historical performance. This data will give you a good starting point for setting realistic quotas. Figure out how much revenue your company generated last year and over the last few years. Also, take a look at sales volumes. How many units or products did your team sell?
You should also look at any seasonal trends in your data. Which quarter had the best sales? Are there any months or seasons when sales tend to drop off? This information helps you to set quotas that account for any anticipated dips or spikes in sales that may occur throughout the year.
Average Transaction Size
In addition to overall sales numbers, you should look at the average transaction size. Your sales quota could be based on the number of transactions rather than the total revenue. For example, sales quotas for refrigerators and bath towels might be based on the number of units sold. In contrast, automobile sales quotas would be based on the total revenue generated.
2. Understand Your Market Opportunity
It’s not enough to simply know your historical performance; you also need to understand your market opportunity. Market Opportunity is the size of the market you can reasonably expect to capture, given your company’s resources and capabilities.
Mark Stiffler, Optymyze expert, suggests conducting market research to understand the size of the overall market and the segments within that market that offer the most growth potential. Once you have this information, you can start building a quota reflecting your company’s potential.
To calculate market opportunity, you need to answer three questions:
- What is your product or service’s total addressable market (TAM)?
- How much of that TAM do you think you can capture?
- What are the growth rates for your product or service and the TAM overall?
Know Your Competition
To truly understand your market opportunity, you need to know who your competition is. What are the other companies in your market doing? What share of the market do they have? What are they doing well? Knowing this information will help you set a realistic and achievable quota.
3. Consider Your Sales Cycle
When setting a sales quota, it’s essential to consider your sales cycle. A sales cycle is the time it takes to complete a sale, from the initial contact with a prospective customer to the final purchase. Some sales cycles are very short and can be completed in a few days. Others may take months or even years. It’s important to consider your sales cycle when setting a quota, so you don’t set unrealistic goals.
Determine Your Sales Capacity
Another critical factor to consider when setting a sales quota is your company’s sales capacity. This is the number of sales your company can realistically make in a given time period. You can determine your sales capacity by considering the number of salespeople you have, the average transaction size, and the length of your sales cycle.
4. Know Your Customers
When setting a sales quota, it’s important to keep your customers in mind. You need to understand their needs and wants to sell them the products or services they’re looking for.
Conduct Customer Research
One way to get to know your customers is by conducting customer research. This can be done through surveys, interviews, or focus groups. Consider using a combination of these methods to get a well-rounded view of your customers.
Drive Sales By Focusing on Customer Needs
Once you understand your customers, you can start to focus on their needs. How can your products or services solve their problems? You’re more likely to make a sale when you focus on customer needs. Plus, by putting your customer first, you’re more likely to build a long-lasting relationship and additional sales in the future.
5. Set a Stretch and an Achievable Goal
When setting a sales quota, it’s essential to establish both a stretch goal and an achievable goal. When you set a sales quota, it is vital to have both goals because it gives you something to strive for while still hitting your quota. This can help to motivate and encourage your sales by having a realistic, attainable goal and a secondary, more ambitious number to strive for.
6. Evaluate and Adjust
After you’ve set your sales quota, it’s important to monitor your progress and make adjustments as needed. Mark Stiffler, Optymyze founder, believes that at the end of the day, you have to reach for goal-setting high sales while preparing for the possibility of not making the mark.
Evaluate your progress regularly to see if you’re on track to meet your quota. If you’re not, make adjustments to your sales strategy. For example, you may need to increase your marketing efforts or offer incentives to your sales team.
Setting an effective and appropriate sales quota is essential for any company. By following the steps outlined above, you can be sure to set a quota that is realistic and achievable. When it comes to quotas, what works for one company may not work for another. The most important thing is to find what works for your company and stick to it. Monitor your progress and make adjustments as needed. And always remember to keep your customers in mind.