Sales managers and executives begin the annual planning process. They look at revenue plans, go-to-market strategies, expense budgets, and new product offerings. Many sales managers leave their team members in the same territory or customer allocations without updating and reviewing their quotas. While there will be anecdotal changes in the area, not enough reviewing has been done.
It is often easier to modify the previous year’s quota than it is for others. Modifying allocations is not an easy task. Then, you need to communicate the changes to your sales team. You might get objections from some or all. Sales managers don’t want to disrupt their sales teams or make their top performers leave for other opportunities.
Many companies have used an equal increase to their quotas over the years based on top-line revenue growth.
This type of quota setting can lead to increased expenses, penalizations for suitable sellers, and not recognizing the hard work that they have done in cultivating a territory or customer base. Poorly designed quotas can lead to disaster. They should be taken seriously.
It is an essential part of planning, so it is worth the time to set the KPIs and Quotas.
Here are five reasons to review your sales quota.
1. The Company Strategy has been Changed
Changes to the company’s sales strategy will be made according to market conditions, new products, mergers and acquisitions, and expansion into new areas.
This usually occurs when a new CEO is appointed or when there is a change of leadership. They want to make a mark and lead the company in new directions. The current CEOs seek expansion and an extension of the company’s strategy. They are usually a bit more cautious about how much they will change the design.
With strategy changes, carrying on with the quotas and KPIs from previous years will not help you. This will set the sales team up for failure from the beginning.
2. Your Market has Matured
There is intense competition, and it doesn’t take long for a market to mature. Market maturity means that it is easier to take market share from other players, which can lead to lower profitability and more difficult fought battles for salespeople. In most cases, carrying the quota will result in team members being penalized. The high days of extensive sales have ended, and it’s now about destroying the grip of some competitors.
3. Recognized New Products Below or Above the Limit
There is an excitement about the many opportunities available to customers as new products are added. Salespeople are often asked to describe the potential of their customers. With eyes widening at the prospect of new conversations, it is easy for them to miss the mark.
Let’s say that the market share (TAM) and customer consumption rates are not clear. You could find yourself paying too much for certain areas but not enough compensation in other lower-quality areas.
The quota Setting is made more accessible by understanding the TAM and having the numbers validated by marketing. The quota number will be affected by the customer profile, analysis of potential customers, and consumption rates. You could be in for a revolt if you get these numbers wrong.
4. Shifting Customers’ Requirements
Markets are shifting in changing economic environments. Innovation may have given customers new ways of doing business, which can indirectly impact your sales.
One company that supplies lubricants and sealants for a manufacturing company experiences a sudden drop-off in its orders. Your products are no longer required by the manufacturer, who has purchased a new line of CNC machines.
This scenario is common across many industries and in different ways. Information technology has the most significant impact on customer needs.
Your company may not be close enough to customers, even though most companies claim they are. This can lead to slow and damaging shifts in your offerings.
5. Fresh eyes
Every business that has grown in its plans must go through the planning phase. It is essential to reset each year and look at your company strategy from a new perspective. What lessons did you take away from last year’s planning? Are there any areas that need more refinement? Are you aware of all the changes that could impact your sales team?
