Every month, sales managers are faced with a tough task: creating fair, but challenging sales quotas. You want your reps to hit their numbers, but you also want to push your team to reach new sales heights. As a manager, it can be difficult to strike a balance between setting impossibly high goals or setting the bar too low.
Instead of agonizing over the right numbers each month and picking a quota out of thin air, you can let your data do the work for you and get more accurate results. If you’re not already using sales metrics to objectively assign a fair, but challenging number to each rep, you’re doing it wrong. Here’s how to do it right.
(For even more detailed information about sales metrics, check out our FREE eBook: The Right Metrics for Your Inside Sales Team.)
Look at Historical Win Rates
As a sales manager, you have to know exactly what each of your reps is capable of accomplishing in order to assign a manageable goal. No two reps are the same, so you should not be assigning any reps the same exact quota. The key is assessing each rep objectively – not by looking at the dollar value a rep closed last month, which could either be a fluke hot streak or a one-off bad performance. Instead, pull data from the last 12 months to see historical evidence of each rep’s wins, losses and overall win percentage.
Here you can see that Joe and Nancy are neck and neck if you’re only considering the number of closed deals in the past 12 months. But the data shows that Nancy is actually a better performer, with a win rate of 30%, compared to just 15% for Joe. Instead of handing so many opportunities over to Joe, who has a tendency to lose them, it’s time to give Nancy more responsibility and a higher quota. You can use this chart to look at each of your reps individually and set a challenging, but fair, sales goal that is personalized to their strengths and weaknesses.
Analyze the Current Pipeline
After looking at your rep’s history, it’s time to consider their future. Take a look at the open opportunities in your pipeline, and see what deals are set to close within the next month. By combining your knowledge of the capabilities of your reps and the current opportunities in the pipeline, you can make a better informed decision about your goals for next sales cycle.
This report takes the guesswork out of your sales pipeline management. You shouldn’t be asking your reps if they feel good about a deal closing – this is completely subjective. Reps have “happy ears” and are often confident a deal will close after a good conversation, and discouraged after a bad one. Instead of relying on emotionally-charged information, this report factors in your historical win rate for deals of a certain size, and the win rate for deals that close after a specific number of days. You know which deals are at risk (red) and which are promising (green) based on how the same type of deals have performed in the past.
Forecast By Employee
After looking at your current pipeline and each rep’s individual win rates, you are almost ready to assign next month’s quotas. This next report shows you the expected dollar amount forecasted for each of your reps, weighted according to the open opportunities in the pipeline and each rep’s historical win rate.
With this data, you can fairly and objectively assign a quota to each rep based on a combination of their sales capabilities and the opportunities they have in the pipeline. By setting the goal just slightly above what they’re capable of, you can push them to exceed last quarter’s sales and close more deals.
Don’t let your reps to tell you they have a gut feeling about their sales numbers next month and base your quotas on anecdotal evidence. By using objective data to really understand the capabilities of your sales team and the state of your pipeline, you can set the right quotas for the right reps and hit your numbers next quarter.