Stop peanut butter spreading your quotas to your sales team.

It’s that time of year. The annual planning process is gearing up. Executives and Sales leaders are looking at revenue plans, go to market strategies, budgets, and new product offerings. However, why do many fail to review and update their quotas from the previous year? The reason is it is easier to slightly modify the previous years’ quota and be done with it. It is a lot of work to modify quotas and then communicate to the entire sales force. The last thing sales leaders want to disrupt is their sales teams or cause ‘A’ players to begin looking for other jobs.

 

Historically many companies peanut butter spread their quotas across the sale organization. Then increase a percentage based on the top line revenue growth expected. This type of quota setting is not valuable. Poorly designed quotas can increase expenses by over paying sales people. Moreover, your best sales people may leave due to quotas being too high.

 

Every year SBI surveys B2B organizations and ask specific questions about their annual planning. We found revenue leading companies review the quota setting process every year. They also state that this is one of the most important aspects to the annual planning process.

 

Download the Quota Setting Guidance Tool to utilize various quota setting guidance metrics, discover why these different metrics should matter to your company, and jump start how to calculate these different metrics.

 

Listen to Matt Sharrers interview John Young SVP of Global Sales on how the right quotas can drive revenue.

 

Here Are 5 Reasons Where You Must Review Your Quota Setting Process:

 

  1. Corporate Strategy has Changed

     

    In order for your sales team to be able to win, you must have a solid corporate strategy that sets the direction. What happens if a new CEO is hired and changes the direction of the company?  This scenario happens monthly in Business to Business companies. What if the corporate strategy is moving from a product centric (on Premises) strategy to a customer experience (SaaS) strategy? This change will completely shift your go to market process. Continuing the previous year’s quota and compensation plans are a sure way to miss your number.

     

  2. The Market has Matured

     

    What if the market place has matured and competition is increasing? In concentrated markets, share battle often leads to a cycle of market share give-and-take, but rarely a permanent share gain for any one competitor. The potential per client has decreased. The time where majority of reps are blowing out their quotas have changed. Previous year’s quotas in this new environment will never work.

     

  3. Potential has Diminished

     

    If your market has matured, then what is the new total available market (TAM) for your products and services? How much of that market do you currently serve and how much more can you capture? Knowing the overall potential by market is important in being able to begin understanding what you can reasonably capture and by when. This also leads to understanding how much white space is available within your current client base. Creating a quota with disregard for potential is the wrong way to do it.  You want to create a fair and level playing field for your sales team.  Understand what the potential is per customer and prospect before you assign a number.

     

  4. Moving to SaaS

     

    If your organization is shifting its go to market from a product to a services then changes to quotas and compensations plans are obvious. However, these changes need to be mandatory in your annual planning process. The past quotas of selling widgets with faster revenue recognition is different than multi-year service contracts. Service offerings are also “stickier” than products. Understanding your customer acquisition costs and Lifetime value (CAC & LTV) is critical to building a SaaS based quota.

     

  5. Buyers are Changing

     

    Buyers and how they buy are changing. If you’re moving to a Software as a Service (SaaS) centric company then organization design needs to be discussed in annual planning. Organization design changes will directly affect the quotas each type of rep will have. New sales strategies such as shifting from field to inside sales can affect quotas. Creating a customer success function can be critical to enhance your service offering. However, this new group also requires a different quota.

     

    The annual planning process is mandatory regardless of your organizations size or industry. Your organization will miss its number if these five examples are not identified. Once these details are fully understood then quota setting will naturally be part of the annual planning.

     

Download the Quota Setting Guidance Tool to utilize various quota setting guidance metrics, discover why these different metrics should matter to your company, and jump start how to calculate these different metrics.

 

 

Additional Resources

 

To leverage SBI’s comprehensive guide of best practices for Quota setting , leverage SBI’s How to Make Your Number in 2018 PDF Workbook.

 

If you would like to participate in a custom workshop focused on quota setting and compensation design, bring your team to engage with a hand-picked team of experts at SBI’s Studio. 

 

Located in Dallas, TX, our facility offers state-of-the-art meeting rooms, lounge, full-service bar, and a studio used to tape our TV shows. SBI provides the location and facilitators, all at a compelling price point.

 

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ABOUT THE AUTHOR

Scott McLeod

Helps clients make their number through advanced analytics, transforming organizations, and innovating go-to-market strategies.

Prior to joining SBI, Scott spent 15 years in the telecommunications and semiconductor industries, holding leadership roles in sales and marketing operations, business analysis, and sales engineer. Most notably, at TelePacific Communications he delivered results on projects that included sales and marketing strategy, CRM design and implementation, marketing automation, product development, market segmentation, pricing, and compensation planning. Scott also managed analysts focusing on driving revenue growth by collecting, analyzing, and applying data.

 

His work has proven invaluable for many SBI clients. For example, Scott oversaw compensation gap analysis, benchmarking, and redesign for a Fortune 500 Corporation in the heavy equipment industry which revealed gaps to best practices in design and the impact to operations and bottom line.

 

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