Sales Quota: Definition, Types, Importance

Sales Quota

Any kind of sales figures given to any particular person or region or distributor is called Sales Quota. It can be measured either in terms money or the stock of goods sold.

It is particularly an amount of target sales that is assessed on daily or monthly basis. To assess the performance of an individual sales person, his/her ability is looked to meet the given target.

Types of Sales Quotas.

This can include many things from cold calling, Marketing emails, advertisements, invitation to executives for events and many more things. It’s always in the interest of the sales team as to how they should get the stuff out.

#1. Sales volume quota

This always includes sales in monetary terms or units sold for a specific period of time. This type of sales quotas is always set for a given year. The sales teams are then assigned their yearly quotas to be accomplished. These quotas are set in the areas mentioned below:

  • Product line
  • Product range
  • Branch offices
  • Individual sales person

#2. Profit quotas

This type of quotas is very useful for FMCG companies as various products add to varying levels of profits. The advantage of this type of sales quota is that the sales person can use his time optimally. Hence he/she can strike a balance between high and low profit yielding products.

#3. Expense Quotas

These are linked to selling costs with a realistic time frame. Few companies set quotas for expenses to different sales levels achieved by the sales person. The sales team may be given an expense budget which is a percentage of a particular region’s sales volume. He/She should spend only that sum as expenses.

#4. Activity Quotas

Under such quotas the sales team is required to execute other activities that will have a long term bearing on the company’s goodwill. Here certain objectives related to the job are set in attaining the performance targets of the sales force. When it comes to the Indian companies we have few common types of these quotas as mentioned below:

  • Quantity of sales presentation made
  • Amount of calls made
  • Number of dealer visits
  • Recovery calls made
  • New clients procured

The given below graph represents the percentage of sales by using cold calling methods. We can easily find out the number of attempts with percentage success. It is relevant from the picture that more the number of attempts more are your success percentage.

Now let us see the various methods to calculate Sales quotas.

  • Any previous year’s regional sales numbers.
  • Cost to the company administration plus gross margin.
  • Revenue goals dedicated in the beginning.
  • Top sales person’s percentage achieved in his region.

Most companies use a permutation of these quotas. The best combined quotas are usually Sales volume and activity quota. Such combination influences selling and non selling activities.

The above methods are only time tested from year to year to achieve the sales quota as these quotas are promised to vendors, investors and banking firms.

They are also influenced by external factors and expenses which are not in the hands of sales personnel. It is advised not to have too many sales quotas as the sales person may not be able to equally concentrate on them.

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