10 Types of Sales Quotas

10 Types of Sales Quotas

March 13, 2020

Sara Howshar

Hitting quota is the story of your business’ success or failure - dramatic, but true. By taking these simple steps when building your quotas, and avoiding a few easily made mistakes, you can set your business on a fast-track to success.

There are a whole host of different sales quota examples. Some are purely of one quota type (e.g., revenue- or volume-based); some are a combination of more than one. We break out 10 sales quota examples for high-performance sales teams based on their type and then explain how to combine them so that they work for you and your team.

The quotas we’ve selected reach into each and every corner of your sales process.

If you need quotas that prioritize sales penetration, read on.

If you need quotas that give the most weight to pure unit-shifting or to higher-value deal-targeting, we’ve got you.

Setting good quotas is about steering your ship of sales toward your wider objective — and there’s a quota appropriate for every kind of destination.

Revenue-Based Sales Quota Examples #

Revenue is typically what most people think of whenever someone says the word “quota.” With a revenue-based sales quota, you’re focusing on bringing in a certain amount of pure revenue per unit of time.

As we’ll see, there are more sophisticated approaches to setting quotas, but revenue-based quotas have their virtues. They make your sales reps’ goals simple, allow you to engage across all market segments you serve, and work toward a generalized growth target for your business.

Below are three types of revenue-based sales quotas.

1. Basic Revenue Sales Quota #

A basic revenue sales quota is just about the simplest kind there is. Sales reps are responsible for bringing in a specific dollar amount of revenue over a given period.

Here’s an example: $10,000 of new revenue each month.

Unless you are working with a very small product array or are perhaps onboarding a new sales rep, the basic model can be a little too basic.

There are ways of juicing it up a little more, which can be effective in maintaining your reps’ motivation.

For example: Assume your rep’s prospecting remains the same, and they’re not having to change who they’re targeting. You can set a compound percentage target. Something like +5% revenue earned per month. That way, if your rep hits their target easily during month 1, they can look forward to a higher target (and higher commission) for month 2.

When to use this quota: A basic revenue quota is most effective when your company’s main target is simply to grow. When your buyer personas are stable and proved, and for reps whose activity record is optimal, you can afford to give those reps a straightforward revenue quota and let them run with it.

2. Forecast Revenue Quota #

The forecast revenue quota uses historical precedents — for a territory, market share, or prior product — for its foundation.

For example: Let’s say you’re launching the Newest Version of your product, and you set a forecast revenue quota for your reps. You’ll need to assess prior sales, the growth of your market share since the launch of the Older Version, as well as the performance of your sales team over the previous period.

From there, you can create an appropriate quota.

For instance: Based on the forecast data for Q1, you may decide to set a goal to sell the Newest Version for revenue amounting to 125% of what the Older Version sold for in the last quarter..

When to use this quota: The forecast quota requires considerable data to deploy effectively, but it’s the best way of ensuring a positive outcome when your company is stepping into new territory or launching a new product version/array.

Quota Tip: The forecast model relies on a heavy amount of data crunching. It’s best applied across an entire sales department or dedicated team. You can then condition expectations for your entire team according to the data.

3. Profit Quota #

The profit sales quota is similar to the revenue quota. But instead of taking revenue as our metric, we use gross profit or margin. When we use gross profit or margin, wetakes selling expenses and the cost of goods sold into account in a way that a pure revenue quota does not.

For instance, a $10,000-profit-per-month quota represents growth more fully than an equivalent revenue quota.

Ensure that you have a good CRM solution in the bag if you intend to make profit quotas a fixture of your sales management strategy! Quota attainment can be hard to achieve practically unless your teams have tools allowing them to easily assess how much profit they’re making per deal closed-won.

When to use this quota: Profit quotas are good for plotting growth and pushing your sales team forward. They’re also particularly useful if your company has a high customer-acquisition-cost (CAC).

A profit quota can help show how much each sale is realistically contributing towards growth (and whether or not you might be spending too much on acquiring customers).

Volume-Based Sales Quota Examples #

Once upon a time, volume-based sales quotas would’ve held as much weight as revenue- or profit-based ones. The dynamic has changed somewhat in the SaaS era, as the idea of “sales volume” has taken on new dimensions.

In traditional sales, volume corresponds to single units sold once, with all value recouped at the point of sale.

But in SaaS, volume-based quotas are a more complex measurement of progress due to:

Nevertheless, moderated correctly, volume sales quotas can still come in handy, especially when you’re looking to maximize value from sales or vying for higher market penetration.

4. Basic Volume-Based Sales Quota #

In SaaS, the basic volume-based sales quota requires your reps to close a certain number of deals per month in a closed-won state (For example: 5 closed-won deals in January).

While closing a deal in SaaS does not necessarily guarantee that you will receive all the value from that deal (customers may churn before the contract's end), it does indicate general progress in the right direction.

When to use this quota: Basic volume-based sales quotas come in handy when market penetration is a priority for your company.

Quota attainment with a basic volume quota means more and more customers own a version of your product, and that your presence in the market has increased.

Quota Tip: It’s also handy when you have a smaller product array or when your reps are sitting on a higher-than-average volume of qualified leads.

5. Differentiated Volume-Based Sales Quota #

Because of the wider product array in SaaS sales, a pure volume-based sales quota can lead to an imbalance.

For instance: If you’re drilling your reps to just sell more, then they’re likely to try and sell higher volumes of your lower-value product for quota attainment.

Not only is this bad for your bottom line — more lower-priced product means lower profit margins, and more difficult upsells later on — but it’s also bad for perceptions of your company, as the public becomes most familiar with your low-end offering.

A differentiated volume-based sales quota helps to mitigate against this outcome. It involves selling discrete amounts of each version of your product.

For example, 5 closed-won deals on a premium subscription, 8 on an intermediate plan, and 12 on a basic plan, per quarter.

When to use this quota: Introduce a differentiated volume-based quota if you’re going for volume-sale but have plans that are undersubscribed. It’s also excellent to introduce when you’re expanding your buyer personas or are widening your product array to encompass more subscription plans. The variation in pace is good for your reps, for whom the sales process remains dynamic, and it gives you the best chance of reaping maximum value from your product.

Combined quota opportunity: To better align volume quotas with your wider sales targets, use a quota that involves selling volume-equivalent-to-revenue-x, or a profit quota.

For example, you could set a quota for your rockstar reps that demands 5 closed-won deals to enterprise-level clients, equivalent to $50,000/ARR each.

6. Persona-oriented volume-based sales quota #

This more esoteric kind of quota concerns prioritizing sales to certain market segments across a unit of time. For instance, a persona-oriented volume-based sales quota might demand 5 closed-won deals to prospects in the college-student segment per quarter.

Your product may appeal to a very wide base of applicable buyer personas. You may have found new ones or discovered that one market segment could promise higher yield than you previously thought. A quota like this helps your reps direct your attention to these high-value areas.

When to use this quota: Persona-based sales quotas are particularly effective when you are seeking to penetrate certain markets, either to provide competition to other companies in the same space or simply to establish your presence among a new set of buyers. Bespoke persona quotas can be effective for optimizing your reps’ use of their time toward this end.

Combined quota opportunity: Depending on the personas you’re targeting — their size and typical preferred deal size, as well as price sensitivity — a persona quota can be ably combined with revenue or volume quotas for the most pronounced effect on increasing value.

For instance, if the persona is a software-company executive, you might combine a persona quota with a revenue quota to ensure that your reps are aiming for enterprise-level deals.

On the other hand, if you’re mainly targeting single-user personas on tight budgets, then a volume quota with an emphasis on your basic plan can help you attain the kind of market penetration you’re after.

Activity Sales Quota Examples #

Whatever their experience or skills, not every month is going to be a stormer for your reps. Activity quotas can be excellent for driving and evaluating contribution to the wider effort, regardless of outcome.

7. Sales Call/Follow-Up Quota #

Communication takes up the majority of any sales rep’s day, but implementing a quota system underneath it can be very effective. A quota for sales call and follow-up contact is the simplest way of doing this.

This way, you’re mandating a target number of communications your reps are sending per unit for time.

For example, 70 calls to qualified leads per month or/with 100 follow-up emails.

When to use this quota: Always. There is no quota system into which a call/follow-up activity quota doesn’t fit snugly, nor is there a quota system that it won’t improve. Keeping activity quotas bubbling over helps sales managers evaluate reps’ progress and keep a solid goal in mind, even if your reps encounter a period where, through no fault of their own, business is slower than usual.

8. Upsell-Oriented Activity Quota #

Upselling your existing customers is an important aspect of SaaS sales. Moreover, it’s a key facet of unlocking growth by adding expansion revenue to your net takings each month.

In fact, most companies that effectively balance the lifetime value they’re seeing from customers against the cost of acquiring each new customer look to expansion revenue to shoulder a lot of the burden.

If you’re looking to prioritize upselling, and if your sales reps also manage accounts, then upsell-oriented activity quotas can be highly effective.

Let’s see how.

Say you give your sales team a quota to contact 5 existing customers a week to enquire about an upgrade to their plan.

If you have a high degree of delinquent churn among your customer base, you may wish to mandate that your reps reestablish contact with 3 at-risk-of-churn customers per week.

You may even want to turn this activity quota into a straightforward expansion revenue quota and secure 3 upsells worth, say, $5,000/MRR, per month.

When to use this quota: Upselling is more than the matter of a quota. It should always be important in your sales culture and a central pillar of strategy. It’s all the more important if you have a large number of established customers on low-level deals.

Upsold customers not only provide more revenue but are less likely to churn, too.

Combined quota opportunity: Integrate this into a rep’s wider revenue/profit/volume quota to give them multiple angles to attack a revenue or profit target from, and balance their new/existing customer focus.

Existing customers are easier and cheaper to sell to than new ones!

9. Next-step activity quota #

Quotas aren’t just useful for bringing in the right quantity of sales to your company — they can be excellent coaching tools, too. Next-step activity quotas are enablement in practice.

This quota type evaluates how many times per month a rep pushes their prospect along to the next stage of the sales cycle. They’ve met their quota by, let’s say, hosting 10 discovery meetings per month with previously qualified prospects, or scheduling 15 demos per month.

When to use this quota: Seasoned reps may interpret next-step activity quotas as micromanagement. However, it’s an excellent means of coaching for inexperienced or struggling reps.

If they’re consistently bringing customers through stages of the sales cycle, their actual sales success is bound to improve eventually.

10. Deal-value activity quota #

This kind of quota involves having your reps approach a certain number of prospects from different value brackets across a given period. An example might involve contacting 20 enterprise-level, 30 small-business-level, and 50 single-user prospects per month.

The purpose of deal-value activity quotas is to incentivize your reps to target across all your market segments evenly when selling. Depending on what demands they’re receiving from their other quotas, in revenue or volume, your reps may be tempted to sell to only lower-bracket customers who they can close at a higher pace or to over-prioritize really high-value but tough enterprise-grade customers. This leads to a squandering of your product’s value.

Alternatively, if you were to set a more tailored quota — for example, make contact with 10 enterprise-level prospects this week — you can drive your reps toward a particular goal for your company. That goal might be revenue growth if your prioritized market segment is higher-end, and market penetration if they’re at the lower.

When to use this quota: Some form of deal-value activity quota is useful regardless of what your business’s current priority is.

For general expansion, use it to encourage sales activity across your market segments. When you want reps to target certain market segments, implement quotas for enterprise prospects for higher margins, or small-biz and single-user for greater sale volume.

Combined quota opportunity: As we alluded to above, deal-value activity quotas are a great way to guide differentiated- and persona-oriented volume-based quotas.

Quota Attainment by Example #

A few inspirational sales quotas are all a sales team really needs to get on their way to success. However, a perceptive frontline sales manager will see how quotas, when combined well, can not only maximize value for their company but also help further clarify a rep’s direction.

A rep who is being measured on both a daunting volume-based quota for enterprise customers and an activity quota for the same market segment will feel more determined and less anxious about failure than if they were measured solely on one or the other.

Likewise, if you give an upsell target to a rep battling through a hard-sold buyer persona on their profit quota, you are giving them multiple means to secure value for your company.

You needn’t stop at our 10 sales quota examples, either. While our selection here represents how you can direct quotas toward each area of your sales process, the number of real sales quota examples is all but inexhaustible.

Experiment to find out which combinations work best for your team.