(Last Updated On: May 10, 2022)

A business runs on a simple production and sales mechanism. Every business you talk about certainly has something to sell which in return provides them a profit. Companies have several branches spread throughout various countries and cities. Through a proper chain of management these branches are monitored from the central offices. 

Every company has different departments assigned with different targets. As far as the sales department is concerned the sales reps are provided with a certain target or quota which they ought to achieve in due time, and successful attainment of the quota earns them a performance bonus or sales commission. 

How do companies provide the sales cut to their sales reps?

As we have discussed above, companies provide a certain cut to their reps for the sales they make. Just take into consideration at once how complicated it would be to coordinate the commission for every sales rep. Companies might have numerous sales reps throughout cities and countries and it would be a total mess if there is no proper dedicated plan for providing the commissions. This plan is called the sales commission plan, a sales commission plan with taking into consideration the process of rewarding the sales cut to the reps.

Earlier this plan was made through spreadsheets manually, which required individuals to fill in entries and maintain the records. It was a bit troublesome and demanded utmost accuracy hence the need for something simplified was felt. 

That’s when a commission management software comes in handy. It is a software which designs sales commission plans for companies and provides them with a dedicated and fully profit oriented sales commission plan.a

What is a sales quota?

In the above paragraphs we have talked about a certain quota that the companies assign to their sales reps. A sales quota is provided to the sales reps who work individually or in teams, based upon the assigned work, by their sales leaders. 

The individual or the team is then bound to achieve it by the end period of the time provided for this sales quota. In the end when the sales reps attain the quota, they receive performance bonuses. 

The goal/objective or minimum level mark that a salesperson or a team aspires to attain in a specific time period – such as monthly, quarterly, or annually – is measured and quantified. 

One of the primary goals of setting sales goals and rewarding employees who achieve them is to drive teams and individuals to achieve their targets and hence earn bonus compensations.

Companies provide quotas to their sales reps and the reps work to achieve these quotas within the specified period of time. There are a variety of sales quotas assigned to the sales reps.

Let us now talk about some of the types of sales quotas which are mostly involved.

1. Sales volume quotas

On the basis of the number of units sold and monetary incentives, this sales quota has been established. If you’d want to be more specific, you may break it down by particular salespeople or product lines, branch offices, or locations.

This may be used to anticipate revenues and track the actions of sales people. This is an example of how a sales volume limit of 100,000 memberships at $5 apiece might be established as the sales team’s quarterly goal.

2. Profit Quota 

It is common practice to establish sales representatives’ quotas depending on the amount of profit they can generate for the firm by selling a certain range of goods and services. If your firm has a wide range of customers and pricing points, this form of quota may be a good fit for you.

3. Expense Quota

Expense quotas necessitate allocating a certain budget to each sales representative. The sales representative’s expenses must not exceed a percentage of this budget, which is based on the region’s projected sales volume. This form of sales quota may be used as a cost-control technique.

4. Activity Quota 

In addition, there is a quota for the amount of time spent on certain activities. In an activity-based sales quota, a salesperson’s performance is measured by the number of sales-related activities they complete in a certain period of time. 

Anything from making phone calls and sending emails to going to clients and submitting paperwork might be included in this category of work.

As a result, sales will rise and agents will be better able to assess their own efforts.

An example of an activity quota is the team’s sales representative, who reaches his daily quota of 20 sales calls without missing a beat.

5. Combination Quota 

In order to complete transactions, certain sales representatives must use a variety of tactics. To get to a bigger goal, you may break it down into smaller, more manageable steps.

Managers may assist sales people learn and improve on a wide range of abilities by combining several techniques. For a monthly profit of $2000, your sales representative must complete 50 phone calls and 5 webinars, as an example of a combination quota. This means that he has both sales volume and activity quotas.

6. Forecast Quota 

In order to determine a manager’s forecasted sales in a certain region, a company uses the concept of forecast quota. The projection is based on the past performance of the company.

As an example of how forecast quotas may be used, they can be used to see where and how income impacts originate from. These quotas may be established in a variety of ways, depending on how the new objectives are calculated.

This is based on past sales and profits, the company’s initial revenue targets, administrative costs and gross margin, as well as the percentage attained by the best salesman in his or her region. 

Conclusion

Setting sales quotas for sales reps in a firm is a fantastic method to provide them with a target toward which they must begin their efforts. It’s the perfect way to keep the team members on their toes.

However, it is important to create realistic targets and implement an incentive system in order to drive increased sales in a healthy manner.