How to Set Sales Quotas (+ 3 Free Templates)
Jess served on the founding team of a successful B2B startup and has used a wide range of sales and marketing tools over the course of her 15-year career. She uses her industry knowledge to deliver the best answers to your questions about sales tools and sales management.
This article is part of a larger series on Sales Management.
Sales quotas enable businesses to hold reps to minimum standards, forecast sales, and establish objectives to hit company sales goals. They can be set by establishing reasonable yet ambitious targets based on revenue, key activities, number of deals, or by using one of our three free customizable sales quota templates. We’ll discuss the different ways to set a quota and best practices to ensure your reps can meet your company’s targets.
What Is a Sales Quota?
A sales quota is a minimum requirement of sales production over a set period of time for employees to complete. It can refer to specific sales activity that needs to be completed, such as calls placed, emails sent, or appointment set, or could be performance-based like setting requirements for revenue generated or deals closed.
Types of Sales Quotas
People in sales management roles are responsible to set minimum activity and performance standards based on organizational revenue, growth, and profitability goals. They can be set for the sales department as a whole, or broken down by teams or individual representatives. When breaking down and assigning quotas to individuals or teams, consider whether they should be divided equally or proportionally depending on revenue or deal potential.
Here are three different types of sales quotas commonly adopted to reach organizational goals:
- Sales revenue quotas: The amount of revenue that must be generated per week, month, quarter, and/or year
- Activity quotas: The number of activities that must be completed (e.g., calls placed, emails sent, appointments set) or number of leads that must be generated each week, month, quarter, and/or year
- Deal-based quotas: The number of deals that must be closed or number of products sold per week, month, quarter, and/or year
3 Free Sales Quota Templates
Setting sales thresholds can be difficult if you’ve never done it before, but using our free sales quota templates can speed up the process. Plus, there’s the added pressure that mis-setting a sales quota can result in financial loss or hardship for your business. Ultimately, you need to develop quotas that are challenging yet achievable to meet your organization’s sales goals.
Download these three free templates and customize them for your business:
Free Sales Revenue Quota Template
If you know how much revenue you want to generate over a period of time, this template enables you to set sales revenue requirements for the sales department, teams, and individual reps. This free template takes a top-down approach, where you determine revenue goals then segment them into teams, individuals, and activities.
Download Revenue Quota Template
Free Sales Activity Quota Template
Use this template if you don’t know how much revenue your business needs to bring in but you do know how much activity should occur each week, month, or quarter. It takes a bottom-up approach, where activity needed to move leads into and through the sales funnel is determined first. Then, based on conversions produced by activities, you can estimate revenue generated or deals closed.
Alternatively, you can also use this template in conjunction with either of the other two if you know how much activity is needed to meet revenue or deal minimums. An excellent way to complement a sales activity quota is by using sales goal trackers. They help you track the activity of each sales rep as well as your entire team with dashboards and reporting features.
Download Activity Quota Template
Free Sales Deal Quota Template
This template is best for your business when you know exactly how many deals your company needs to close or wants to finalize during a set period of time. Similar to sales revenue quotas, it takes a top-down approach starting with revenue goals broken into deals, then the activity needed to hit those closed-deal assignment standards.
Best Practices for Establishing & Managing Sales Quotas
Establishing minimum sales requirements to sales reps and teams is an essential strategy development component in your business’ sales plan. To be effective in helping your organization achieve its goals, best practices should be followed to ensure sales quotas are optimal and achievable.
Here are five best practices to follow while setting and managing sales quotas:
1. Use Historical Data
If your business has adequate historical sales data on activity and performance, use it for setting sales production standards. For example, if in a normal year, each sales representative brings in between $100,000 and $200,000 of revenue, that range provides a baseline for how to set sales quotas based on historical data.
Historical data should also take into account sales trends and seasonality. For instance, if your business tends to do 50% of its sales in one quarter, then quarterly sales quotas should reflect that with higher quotas set during the busy season and lower quotas for the quarters that historically produce fewer sales.
2. Personalize Sales Quotas Based on Achievability
It’s simple to take a total sales team quota and divide it evenly but it’s a poor practice, because not every sales rep is made equally. Each sales production assignment should be individually tailored based on the experience, skills, and resources of your sales reps.
For example, let’s say you have a four-person sales team with two brand-new reps, one with three years’ experience, and one with seven years’ experience. The team needs to produce $500,000 of total revenue over the next year. Instead of dividing that by four, set relative quotas such as requiring the most senior rep to produce $200,000, the three-year rep to produce $150,000, and the new reps to produce $75,000 each.
The same should be considered for activity-based quotas—some reps may be more comfortable or better at particular sales tasks than others. Personalization is also needed when reps or teams don’t have the same potential to generate revenue, such as teams that sell products or services with varying price points and profit margins.
As another example, imagine you have a three-person sales team, each with about the same level of experience. One agent enjoys and achieves excellent results with cold calling, another gets many leads through referrals at networking events, and the third is great at generating and nurturing leads using sales emails. Set activity requirements that reflect each rep’s strengths and require more activity of each rep within their specialized areas.
3. Provide a Road Map for Hitting Sales Quotas
Activity-based quotas, by default, already provide a basic list of objectives. If you are setting sales revenue or a deal-based performance standards, however, you can also set segmented activity objectives for those. Regardless of the type of sales quotas you set, provide support, guidance, and continual sales training to help your sales teams hit their numbers.
An example is if you set a deal-based sales quota of 25 deals over the next year. Your sales operation is strictly cold calling, and you know that 3% of calls achieve setting a prospect appointment. Forty percent of prospect appointments result in sending the prospect a business proposal, and 50% of proposals sent become closed deals.
Based on these numbers, 4,166 total calls need to be made to place 125 appointments, to send 50 proposals, and to generate 25 deals. You can segment this even more by breaking down the recommended cold calls placed on a weekly basis. This equals about 87 cold calls per week that need to be placed to hit your annual deal-based quota.
From there, you can also either divide activity requirements equally among your agents or proportionally based on the need to personalize them for individual reps. Throughout the year, sales managers need to consistently meet with teams and with sales reps individually to measure and track progress and for one-on-one coaching.
4. Set Realistic Sales Quotas
Minimum sales requirements need to be achievable but still challenging enough to excite and stretch your sales team. If set too low, a sales rep might underachieve for the remainder of the week, month, quarter, or year. If a sales quota is set extremely high, sales reps could slow down and give up trying to achieve them due to feeling hopeless.
One way to ensure production standards are realistic is to look at historical averages to see what your company’s sales reps were able to accomplish, then use those numbers as a base for your current reps. If you’re a new business or have never tracked previous sales activity, you can use industry metric standards for things like lead qualifying, email open, or deal closing rates and work backward to set the activity or performance quotas.
In order to solve the problem of reps slowing down their activity, small incentives and rewards could be used early on and throughout to encourage them to keep striving. For example, you can start giving away gift cards to reps who exceed their weekly requirements by a certain threshold, then increase the value of the gift cards throughout the time period while also elevating the threshold requirements.
5. Use Technology to Manage Sales Quotas
Sales technology, like customer relationship management (CRM) software, is a great resource for setting and managing sales quotas. CRMs allow you to establish activity or performance standards for a given time period, assign them to reps, and track their progress either on a person-by-person or team basis.
Freshsales, for instance, offers sales forecasting tools that allow you to take a sales forecast, add a quota, and assign it to a team or individual user. The quotas can then be monitored on the sales forecasting dashboard with the CRM’s system.
Freshsales setting a quota (Source: Freshsales)
Freshsales sales dashboard with quota progress (Source: Freshsales)
Sales gamification software can also be used to create competitions for hitting sales quotas, monitoring progress, and rewarding teams or individuals who demonstrate high or improved sales performance. Spinify is an example of a sales gamification tool where you can set competitions based on activity, such as calls placed, and monitor the leaderboard.
Spinify phone call leaderboard (Source: Apple)
Rewards can be used to motivate your sales teams to strive for excellence and achieve their production requirements as soon as possible to improve sales performance. Gamification tools like Tango Card make it easy for managers to give out gift cards, prepaid cards, or donations to various charities for reps who hit their sales quotas.
Tango Card gift card catalog (Source: New Pace)
Bottom Line
Setting sales quotas for your business provides a standard threshold for your sales teams and individuals to meet. They also offer a roadmap for how sales revenue projections will be achieved. With our free sales quota templates and tips for setting and managing the process, you can better ensure your reps will be excited to work toward meeting your organization’s sales goals.
