Understanding Your Sales Quota Agreement

Salesman talking to woman in automobile showroom
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Love them or hate them, sales positions and quotas go hand in hand. While most every sales professional is assigned a quota, many do not understand how they are formulated, why they are important and how having a full understanding of your quota can be a major factor in your success in your sales career.

Quotas From the Management Side

Management sees sales quotas as both a tool for forecasting and for holding their sales professionals accountable.

Without assigned quotas, reps have no formalized revenue or activity targets to shoot for and management is weakened without the ability to reference an objective expectation that both the managers and the reps agree to. And while reps may not necessarily agree with their assigned quotas, most employers include acknowledging any assigned sales quota as a requirement for employment. This acknowledgment means that the employed sales professional understands that he will be expected to produce at least his assigned quota and that management has the right to expect their reps to deliver assigned quotas.

Quotas are not, however, purely a means for management to hold their employees accountable. Quotas are also used as a measurement tool to estimate and predict how much revenue can and should be expected from each rep or account base. While management often inflates the assigned quotas when compared to their estimates, quotas are (usually) grounded in reality and based on reasonable expectations.

How Most Quotas are Formulated

If you work for a sales company that has multiple sales territories or product lines, your assigned quota is likely the result of past performances, market share, and market data. While these may seem a bit confusing, understand that for almost any industry, independent reports are available that describe the total opportunity for each market area and are often purchased by sales companies who need to understand better how best to market, position and sell their products or services.

For newly formed sales companies, assigning quotas is much more of an optimistic approach since they lack key indicators like past performances, but the vast majority of assigned quotas are not random and are based on research and evidence.

The Importance of Quotas

Quotas are important for several reasons. First, they do give management a measuring vehicle against which they can judge the performance of their sales representatives. Secondly, quotas provide valuable feedback for management that aids in their forecasting requirements. Third, quotas are often used as part of a sales professional's compensation plan. Many comp plans include over-achievement bonuses that reward reps who exceed their assigned quotas and some comp plans include a variable pay-range that increases the closer a rep is to assigned quota.

Quotas From a Sales Professional's Viewpoint

Get 10 sales professionals in a room and ask a simple question to them all: "How do you feel about your assigned sales quota?" Those who respond that their quotas are too high and unrealistic are those reps who are far short of hitting their quotas. Those that respond that their quotas are tough but attainable and those reps who are very close or slightly over their assigned quota.

And those that respond that their quota is very accurate and is a great motivating tool are those who are producing revenue that far exceeds their assigned quota!

Quotas are a part of practically every sales job and are often the cause of the majority of stress that a sales professionals deal with on a daily basis. Knowing that you are expected to deliver your assigned quota drives some to work even harder than they normally would and drives others to the world of fear, complaining and negativity.

Learn how successful reps view their quotas, manage around their quotas and view them as their minimum acceptable standard.

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