The Ultimate Guide to Setting Sales Quotas

In an ideal world, the words “sales quota” bring excitement and motivation to sales reps. But then again. However, when I’ve talked to early-career sales professionals, they’ve been worried about over-ambitious, intimidating, and exhausting sales quotas set by managers.

From my experience covering sales, I’ve seen the best managers save their reps from that anxiety. Sales quotas should be realistic, enjoyable, and achievable. That’s the only way teams can consistently grow sales while keeping employees satisfied.

In this guide, I’ll outline the different types of sales quotas, share some examples, and explain my strategy for setting reasonable expectations that energize your team.

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A sales quota is a goal set for each sales representative to achieve within a given period — usually a month or a quarter. Typically, achieving a sales quota results in a reward that’s part of the sales rep’s compensation package.

I’ve seen business owners address sales quotas as “sales targets” or “sales goals.” But these terms don’t mean the same thing, and using them interchangeably can add undue pressure on your representatives. To avoid this confusion, let me define each term so you can accurately identify what a sales quota is.

Sales Quotas vs. Sales Goals

Sales goals are overarching targets set for the entire company, usually for a period of one year. In contrast, a sales quota is the individual contribution expected from each sales representative. Typically, if most reps achieve their quota, the sales goal is also met.

Imagine I want to increase my company’s revenue by 20% in 2024. To achieve this, my company needs to make a total of 20,000 sales across the year. This is the sales goal for my company. I’ll make it happen by dividing the workload among all my sales reps and spreading it out via milestones they should achieve every quarter. Hence, their sales quotas.

Sales Quota vs. Sales Target

Sales targets are set for an entire sales team (as opposed to one individual). Sales quotas are when you divide the sales target among each rep in the team. Ideally, that division is based on each person’s capacity and past performance.

Teams often use sales targets to convey a bigger picture and motivate sales reps to work as a team when achieving quotas. This helps ease the burden by making quotas more of a collective experience.

Before diving into the nuances of setting realistic quotas, I want to highlight some stats from HubSpot’s 2024 Sales Trends report to give you a sense of what to expect.

• Achieving sales quotas is getting harder. This year, 54% of sales reps find it more difficult to sell compared to previous years.
• Still, a high number of sales goals are achieved. Nearly 60% of sales pros are exceeding their set goals this year.
• Building strong customer relationships is essential. 82% of sales pros feel that connecting with their customers is important for sales — and it’s the most enjoyable part of their job.
• Sales reps are spending less time selling. Most sales reps spend only two hours a day actually making sales.
• Sales reps typically spend one hour per day doing administrative tasks.
• AI is the MVP for reducing repetitive tasks, such as sending emails or researching a company; sales reps can save up to two hours every day by using AI.
• 78% of sales reps believe that AI makes them more efficient at their tasks.
• 66% of sales pros say that AI helps them better understand customers.
• Prospects are finding other channels to inform themselves about a product. 92% of prospects do their own research before approaching a sales rep.
• 71% of prospects are satisfied with doing their own research and skipping salesperson interactions.

These stats reflect the current climate for today’s sales teams, but every team should track their own sales metrics.

Ideally, setting sales quotas is a process unique to each business. What works for one team may not work for another. That’s why it’s important to outline the different types of sales quotas; you’ll need a variety of ideas to pick which resonates most.

When researching this article, I learned that different sales strategies call for different quota-setting strategies. I made a point to learn six different types of sales quotas, which will help you as well.

Activity Quota

An activity quota challenges sales reps to achieve a certain number of sales activities within a given time. For example, I could assign two of my sales reps to qualify a hundred leads for cold calls by the end of each month. While this activity doesn’t directly result in a sale, it contributes to the revenue in the long run.

Volume Quota

A volume quota is simple and probably the most common among sales quotas. Each sales rep is challenged to achieve a certain number of sales or generate a certain amount of revenue during an assigned period. For example, close 10 sales per month.

Profit Quota

A profit quota is a slightly modified version of the volume quota; each sales rep’s targets are measured by the overall profit they bring to the company. This means subtracting the cost of goods from the revenue quota.

Personally, I feel this adds a complication for no strong reason, so I don’t recommend it.

Combination Quota

Sometimes, I need to set a combination quota for my sales reps when they’re dealing with more than one type of goal. Here’s an example to explain.

I want my sales rep to call a certain number of hot leads every month. Depending on the conversation, she may successfully sell to a few of them, generating revenue. I’d set a combination quota of 50 calls (activity quota) and $2,500 in sales revenue (volume quota).

Forecast Quota

A forecast quota is based on an individual rep’s historical performance. For small markets within my company, I ask each sales rep to achieve a 10% higher quota than they did the previous quarter. If one of my sales reps brought in $5,000 of sales revenue in Q3, her goal for Q4 will be $5,500.

With the different types of sales quotas available, it’s easy to get confused between the types and set the wrong quota for your business. I can simplify this for you by giving a couple of examples of sales quotas from my experience.

The key to achieving higher sales is not setting sky-high quotas. Unrealistic quotas often lead to demotivation and burnout for both sales leaders and reps. The key is creating goals that are challenging yet comfortable enough for sales reps to achieve.

Bjorgvin Gudmundsson, a key leader at inecta Food ERP, also has his fair share of experience with unrealistic quotas.

He says, “If quotas are too high, it creates false expectations about growth, leading to misalignment between sales capabilities and organizational readiness. Conversely, if quotas are too low, salespeople might lose motivation, adversely affecting their performance and, ultimately, the company’s revenue.”

The thing is, sales leaders don’t do this on purpose. You can accidentally set unachievable goals for your sales team without even realizing your expectations are beyond their capacity.

You can fix this by devising the following strategy to calculate sales quotas, which considers company goals and the team’s performance capacity. Here’s how.

Step 1. Establish a baseline.

The baseline is the minimum number of sales that must be generated in a given time frame to keep my company running. This is a revenue goal the sales team has to achieve because going below it means a lack of growth for the organization.

I look at several factors while calculating a baseline. First, I take the gross profit generated by the team over the past year and divide it by 12. This gives me a general idea of the minimum sales volume my team should bring in every month.

I adjust the baseline after I look at market conditions, analyze more historical data, and consider sales forecasts over specific periods.

Pro tip: One thing to remember is that a baseline doesn’t need to be the same for all your teams. If your product has a higher demand in certain states, the baseline could be higher for teams in that region. It’s important to accommodate such specific criteria.

Step 2. Take a bottom-up approach.

When setting sales quotas, steer clear from a top-down approach because that prioritizes the company’s goals while ignoring historical sales data and the team’s proven capabilities.

Instead, go through the achievements of your sales teams from the previous year. This includes the milestones they’ve reached, the overall revenue they generated, and the amount of sales quota attainment each team member has taken care of.

Then, you can set quotas based on this data. It’s more realistic because it’s based on performance the team has already proven.

So, if one sales team brought in $500,000 in revenue in the past year, you could consider increasing this year’s quota by 10% while incentivizing the best performers on the team.

Pro tip: Do you run a start-up or head a new sales team where you absolutely need to achieve quotas based on the company’s expectations? Even if a top-down approach may seem like a logical choice in these scenarios, it’ll still burn out your team very quickly. Instead, consider hiring a few more people and divide the load more compassionately.

Step 3. Adjust quotas for each rep.

Now that you know generally how much your team should be doing, the goal is to divvy up the workload so each person has a reasonable workload decided with them in mind.

If I set the same quota for newly joined reps and experienced sales pros, their win rates would vary drastically. When assigning a sales quota to each rep, take a bit to consider their knowledge, circumstances, and historical performance.

Kelly Sullivan, owner of Kokomo Botanical Resort, does the same. He says: “I evaluate each salesperson‘s track record, territory, and product to determine growth rates that push them outside their comfort zone but are still achievable. The key is setting quotas that, while challenging, are fair based on a salesperson’s potential.”

Step 4. Set activity goals.

It’s time to establish the finer details of each sales quota. A well-established expectation in the sales industry is that a good quota is mostly achievable by most of your team. David Ciccarelli, CEO at Lake, explains it further.

“Realistic quotas are set so that if 80% of your team hits only 80% of their quota, the company overall still hits the plan for the month. The upside, therefore, is when 80% of your team hits 100% of the quota, you beat the plan by a wide margin,” he says.

Since a quota is more like the finish line at the end of the journey, I also establish activity goals; these milestones keep reps focused, even in a long sales cycle. Yet, I don’t consider sales activities as a separate quota with a specific time commitment — that could add up to excess pressure.

Pro tip: Incentivize the activity goals, no matter how small they are. This brings a sense of achievement to sales reps every time they meet a goal, encouraging them to keep prioritizing positive action that leads to sales.

Set Attainable Sales Quotas for Your Team

I’ve seen sales teams burdened under heavy quotas that look impossible to achieve in the given time frame. That’s why I suggest prioritizing the capacity and well-being of your sales reps by setting goals that are healthy yet challenging.

If you also want to set realistic quotas for your sales team and enjoy the boosted productivity and revenue that comes with it, try my sales quota strategy along with the above tips from other professionals.

Editor’s note: This post was originally published in February 2022 and has been updated for comprehensiveness.