Sales Quota: Possible Reasons Your Sales People are Missing Targets
Nothing throws growth forecasts and sales projections into disarray like missed sales quotas.
But the sad reality of sales is that so-so performance is more ‘status quo’ than an emerging issue. 67% of sales reps regularly miss sales quotas, and only 24.3% of salespeople managed to exceed quotas in 2021.
Organizations that make smart hiring decisions and strategically target issues that lead to poor quota attainment can increase revenue and profitability exponentially. But how can sales leaders diagnose the source of their teams’ lackluster performance?
This article breaks down everything you need to know about sales quotas and why your sales representatives struggle to meet them.
What is a Sales Quota?
A sales quota is a defined sales goal, target, or minimum performance level that sales reps, teams, and departments are tasked with meeting or exceeding. Sales quotas are generally created along a set timeline (typically monthly, quarterly, or annually). They can encompass everything from the value of sales made to new customer acquisitions or territorial expansion.
What are the Types of Sales Quotas?
1. Activity Quota
Activity quotas establish a minimum amount of sales activities that must be completed each month, quarter, or year. Activity quotas vary across industries but often involve a minimum number of outbound calls, prospective emails, or other forms of outreach directly related to achieving sales goals.
Activity quotas are more common in high-volume sales environments with shorter sales cycles.
2. Profit Quota
Profit quotas are similar to revenue-based quotas, but profit quotas account for sales expenses and the cost of goods sold, unlike revenue quotas.
This can be particularly useful for stimulating growth and tracking profitability for organizations with high customer acquisition costs.
3. Volume Quota
Volume-based sales quotas are simple and easy for sales management to track. Sales teams operating under volume quotas are required to close a specific volume of deals in a given period. For example, a sales representative may be expected to close eight new deals each month to meet their volume quota.
Volume quotas are ideal for organizations focusing on market penetration to drive revenue and growth.
4. Forecast Quota
Forecast quotas come in handy when companies launch new products or services in territories or markets they have operated in previously. This experience is crucial for creating realistic forecast quotas.
Organizations can look at conversions, revenue, and sales activities made during previous sales efforts to create quotas and sales goals for the new offering.
5. Revenue Sales Quota
If your organization wants to keep quotas simple, revenue sales quotas are the way to go. Revenue sales quotas charge sales representatives with generating a specific amount of revenue over a given time period.
Revenue sales quotas are a straightforward way to track sales representative performance and incentivize growth. This style of quota works best when target markets are well-established, and sales activities are high.
6. Combination Quota
Combination quotas integrate the types of quotas above to fine-tune sales productivity and performance for specific markets, sales cycles, and industries.
Organizations seeking to increase market penetration and expand their sales territory may use a combination of volume and activity quotas to incentivize sales representatives to pound the pavement and close new contracts.
Conversely, a company building its sales strategy around a new product launch with high customer acquisition costs may turn to forecast and profit quotas to track goal attainment.
Three Common Reasons Why Sales Teams Miss Quotas
Sales teams can miss quotas for a near-endless amount of reasons.
While market downturns and economic shifts from circumstances like the coronavirus pandemic can wreak havoc on the most well-established quota strategies, most failures to meet quota are related to more ordinary, fixable variables.
Let’s look at three of the most common reasons sales representatives and their teams miss quota.
A Weak Sales Pipeline
69% of surveyed B2B sales professionals felt their pipeline didn’t provide enough opportunities to meet quotas consistently. If you circle back to the top of this article, you’ll see that this figure closely aligns with the number of sales reps that regularly fail to meet quotas- 67% vs. 69%.
While this similarity doesn’t mean all sales representatives who fail to meet quota have their pipeline to blame, it suggests that sales performance may dramatically improve by aligning sales and marketing efforts to create stronger pipelines.
Inefficient or One-Time Sales Training
Market trends and sales strategies are in a constant state of flux.
Failing to update and adapt your organization’s sales training places your salesforce and company at a distinct disadvantage compared to competitors keeping their ears to the ground for new and emerging tools, techniques, and practices. What’s even worse is putting new hires through a one-time training program and then releasing them into the wild.
Now we arrive at the primary source of so many sales department woes. Sales is a notoriously difficult field when it comes to recruitment and retainment.
In recent years, the average cost to recruit a new sales representative has climbed to a painful 150-200% of the new representative’s first-year salary, and downtime to find a replacement averages at over six months.
Considering the significant costs incurred to onboard a new sales representative, recruiting the best and brightest becomes mandatory for companies that want to expand their market, increase profitability, and regularly meet or exceed sales quotas.
Using predictive analytics to optimize your hiring process and gain insight into your sales teams’ performance and productivity increases quota attainment four times faster than competitors that fail to employ this field of technology.
Improve Sales Team Performance with Us
PerceptionPredict uses predictive analytics, an advanced subset of artificial intelligence, data mining, and computational and statistical modeling. We provide organizations with cutting-edge tools that empower them to make the optimal hiring decision every time.
Our Performance Fingerprints identify the key traits and characteristics that distinguish excellent sales representatives. Book a demo today to learn more about how we use predictive analysis to create exceptional salesforces.