Sales Quota - Meaning, Importance, Types & Example
What is Sales Quota?
Sales quota is the sales goal or figure set for a product line, company division or sales representative. It helps the managers to define and stimulate sales effort. Sales quota is the minimum sales goal for a set time span. Sales quota can be individual or group based e.g. for a business unit or a team.
It is a way or a parameter to drive the sales organization to achieve and realize its targets before hand. It also helps in growth and investments required.
Generally sales quotas are set slightly higher than the estimated sales so as to stretch the sales force effort.
These are developed through the study of annual territory marketing plan. In this the plan for developing new accounts and expanding existing accounts is given by the representatives.
In this article:
Sales Quota Types
They are mainly of the following types:
1. Volume Based : This is determined by number/units of products/services sold.
2. Revenue Based : This is determined by sales generated by sales of products or services.
3. Profit Based : This is determined by profit earned through the sale.
Importance of Sales Quota
It is a very important driver for sales driven organization or company. Many companies e.g. FMCG sector depends upon the efficiency and desire of the sales force. Sales quotas channelize their efforts and keep them accountable. Many a times percentage of quota determines the variable pay they would earn in an year.
These targets also determine the overall companies' performance. The aggregation of all the sales quota can determine company.
How to set Sales Quota?
Sales quota can be set through many methods.
Common methods depending upon the company or individual used are :
1. Strategic Estimation : In this method, as per the estimation and planning for future sales drive individual quota of sales designated for individuals or smaller groups.
2. Individual Capability : This method sees the capability of the sales force and also the previous performance put in by the team. This helps in deciding the sales quota for next year.
Example of Sales Quota
New business goal: - $1,000,000
Average sales size: - $50,000
Total sales needed to achieve the goal: 20
Hence, this concludes the definition of Sales Quota along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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