Set a quota from team capacity, past results and ramp, and explain to the team how you got it.
Build a sales quota from the bottom up: work out what each rep can realistically produce from their own history, add those figures together, and compare the total with the target head office sends you. Where the two differ, take the gap to your own manager before you hand any number to your team.
Picture the usual way it goes instead. In the second week of the new financial year, an email from head office brings a single team target for the quarter, with a note that it is "in line with the company's growth plan". You divide the target by the number of reps and send each person their share. At the next team meeting one rep laughs and another goes very quiet. By the end of the month your best seller has had coffee with a recruiter. Quotas set only from the top down tend to land this way.
A bottom-up quota starts from what each rep can realistically produce in the period, based on their own history. The team figure is the sum of the rep figures.
Each rep's figure uses three inputs that are already in your CRM: the number of qualified opportunities they usually work in a period, their win rate on those opportunities, and their average deal size. Multiply them together. Opportunities x win rate x average deal size gives you the expected value of what that rep will close.
A fourth factor adjusts for reps who are still in ramp. For them, take the expected value and multiply it by the share of full quota they are expected to carry, averaged over the period. If a ramping rep has no history of their own yet, use the team's typical inputs.
Wei Ming is a sales manager building a quota for the coming quarter from his team's history (his team and all its figures are an invented example, in S$). Each win rate below is that rep's own rate from the past year.
Aisha: 18 opportunities x 30 percent x S$12,000 average deal = S$64,800 Raj: 16 opportunities x 25 percent x S$10,000 average deal = S$40,000 Daniel: 16 opportunities x 25 percent x S$11,000 average deal = S$44,000 Mei Ling: 14 opportunities x 20 percent x S$9,000 average deal = S$25,200 Hui Min: 16 opportunities x 25 percent x S$10,000 average deal = S$40,000 at full quota, then 75 percent of S$40,000 = S$30,000
Hui Min is in months four to six of her ramp. Her quota for those months was set at 50, 75 and 100 percent in Lesson 3.1, which averages 75 percent over the quarter. For her inputs, Wei Ming uses the team's typical 25 percent win rate and S$10,000 average deal.
Adding the five figures (64,800 + 40,000 + 44,000 + 25,200 + 30,000) gives a team bottom-up total of S$204,000.
Head office has set the team a target of S$240,000. Subtract the bottom-up total and the gap is S$36,000 (240,000 - 204,000). Put another way, head office is asking for about 18 percent more than the team's history suggests it will produce.
Don't hide that gap, and don't simply spread it across the reps. Take it to your own manager with your numbers and discuss it. There are only a few ways to close a gap like this, and each one has a cost. More opportunities per rep needs more prospecting time, and that time has to come from somewhere. Higher win rates need better skills, which take time to build through coaching (module 6). Bigger deals need a different kind of buyer or a different product mix. Another hire takes months to ramp, as module 3 showed.
The discussion usually ends one of two ways. The target may be adjusted. Or the target cannot move, perhaps because of commitments made to investors, and you agree a plan that closes part of the gap, with the rest acknowledged as a risk. Either way, your manager now knows what the target is based on, and you have done more than pass a number down.
Wei Ming and his manager agree to keep the S$240,000 target, with two changes: budget for one more hire next quarter, and marketing support to raise qualified opportunities for Raj and Mei Ling, the two reps with the lowest figures.
When most of a team cannot reach quota, the quota stops doing its job. A target is meant to shape effort. A target that feels impossible tells reps their effort will not be rewarded, and the most capable reps, who have other options, are the first to start looking elsewhere.
This does not mean every quota should be easy. A quota should take good work to reach. A stretch of that kind is different from a number nobody on the team could plausibly produce, judged on the history you have. If your bottom-up figure is well below the target and nothing changes to close the gap, that is a warning worth raising with your manager.
Reps also don't all need the same quota. Aisha's history supports a higher figure than Mei Ling's, and her quota can reflect that. Many teams set individual quotas that add up to slightly more than the team target, so the team can still hit its number if one rep falls short. Whether you do this depends on your company's policy and on whether your team will see it as fair. How pay is attached to quota is covered in Lesson 7.2, "The parts of a sales pay plan".
People accept a hard number more easily when they can see how it was built. Show your team the opportunities, win rates and deal sizes behind each rep's figure, the company target, the gap, and what is being done about it.
Split what you show by audience. Give each rep their own inputs privately in their one-to-one, so nobody's numbers are compared in public. Show the team total, the target and the gap to everyone.
Wei Ming walks the team through the sheet at the next team meeting this way: individual inputs in one-to-ones, and the S$204,000 total, the S$240,000 target and the S$36,000 gap in front of the whole team, along with the new hire and the marketing support. Raj asks how he can raise his opportunities from 16 to 20. It is the most useful question of the meeting, because it turned his quota into a plan he could work on.
In the activity below you will build a bottom-up quota for a sample team of five and compare it with a given company target. Write each rep's inputs in separate columns so you can see which factor drives the difference between them.
Work out a bottom-up quota for a sample team of five, then compare it with the company target you are given.
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