Summer after Summer, we analyse our reports to see if we are on track with our Go-To-Market strategy. Halfway through our journey every time we realise, we are falling short and probably getting into a panic mode as targets start appearing to be impossible. How then can we have the right frame of Sales quotas established? Here are some steps to follow when setting sales quotas for a SaaS product:
Define the sales goal: Start by defining the overall sales goal for the organization, taking into consideration factors such as revenue targets, market growth, and company objectives.
Choose the base metric: Select the base metric that will be used to set quotas. This could be ARR, MRR, average deal size, conversion rate, LTV, or a combination of metrics.
Analyze sales data: Analyze historical sales data to determine the average performance of sales reps and to identify trends and patterns.
Determine quota distribution: Decide how the sales quota will be distributed among the sales team. This could be based on factors such as individual performance, role, and territory.
Set individual quotas: Based on the analysis and distribution method, set individual quotas for each sales rep.
Review and adjust quotas regularly: Regularly review and adjust the quotas based on current performance and market conditions.
Geography can also be a factor in determining sales quota, but it is not the only factor. Other factors that can influence sales quota include the size of the target market, the competition in the area, the product or service being sold, and the resources and capabilities of the sales team. The specific mix of these factors will vary from company to company and market to market, and the most effective sales quotas are those that are based on a thoughtful analysis of the relevant factors. It's important to note that setting sales quotas can be a complex process, and it's best to seek the advice of experienced sales leaders and data analysts to ensure that quotas are set in a way that drives results and meets the overall goals of the business. Achieving these sales quotas make more sense when backed by metrics, that help both to quantify and qualify the efforts.
What are the base metrics to set the quotas?
There are several base metrics that can be used for setting sales quotas in a SaaS product. Some of these include:
ARR (Annual Recurring Revenue)
MRR (Monthly Recurring Revenue)
Average Deal Size
Conversion Rate
Customer Lifetime Value (LTV)
Churn Rate
It's important to consider the specific goals and objectives of the business when choosing which metrics to use as the base for setting sales quotas. Additionally, some organizations may use a combination of these metrics to set more accurate and effective quotas. There are more angles to a qualified sales quota discussion, spreading across seasonality, territories, team availability and not to forget training that might be required. We will be discussing these in the upcoming blogs, but the point here is to drive you to understand the importance of the quota management while you ensure you don’t loose track of your GTM strategies. If a GTM has been established, a close planning of sales quotas to efficiently arrive your year end goals is equally important.