Quota

Quota turns a company revenue goal into a hiring and capacity plan. It sets what commission is paid on, what the forecast assumes and how many people the team needs. Set too high, it demoralises reps and inflates a forecast that never lands. Set too low, it pays for effort that was never stretched and hides whether the sales process actually works.

A quota is a number a salesperson is expected to reach in a fixed period. It is most often new revenue booked, but it can also be deals closed, meetings held or renewals secured. A rep with a quarterly quota of 150,000 in new contracts is judged against that figure, and commission is usually tied to how much of it they reach. The share reached is called attainment.

• Setting the same number for every rep regardless of territory, experience or ramp stage.
• Treating a team that mostly misses as a people problem when the number itself is the problem.
• Paying on a quota that can be hit by bending the definition of a qualified deal, which is Goodhart's Law at work.

• Start from the revenue goal and divide it by a realistic quota per rep. The result is the headcount the plan needs.
• Check the number against history: what do typical reps close in a period, given the average deal size and the length of the sales cycle?
• Give new hires a lower quota while they ramp, because a new rep cannot close at full pace in the first months.
• Make sure the pipeline can support it. A quota needs enough qualified opportunities behind it, which is what pipeline coverage measures.
• Use the same definition of a sale as finance, so commission, forecast and accounts agree.