How AE Sales Quotas are Set
Here’s a fairly common situation: a company hits their number but only 25% of the team hit goal.
I know you’re not surprised. But what you may not know is how it happens. I’ve been on both sides, and I’ll share it with you. If you’re in tech sales you definitely need to know.
It’s just math.
A Hypothetical Sales Org
Let’s imagine a team with the following make-up:
- 1 CRO
- 2 sales directors
- 6 sales managers (3 managers per director)
- 48 account executives (8 AEs per manager)
Now that we have our team, let’s say each AE has a quota of $600K.
So that means full sales quota coverage of $28.8 million ($600K x 48), right?
Buffer Built-in at Every Level
There’s buffer built in at every level.
Those six sales managers? Their quota numbers are the sum of the AEs’ numbers — minus 10%.
The two sales directors? Their targets are the sum of the managers’ numbers — minus 10%.
And guess what? The CRO’s number — the company’s quota — is the sum of the directors’ numbers, again minus 10%.
So with this example, the quota for all the AEs is the $28.8 million we calculated before. But the executive team’s goal is only around $21 million.
Here’s how the execs actually expect things to play out:
- 25% of the team hits their quotas (averaging 120% attainment)
- 60% of the team contributes reasonably but misses their quotas (averaging 80% attainment)
- 15% of the team really struggles to hit quota (or could be newer reps)
And they account for that when setting the individual targets for the AEs.
Again, it’s just math.
So — Can You Do Anything About It?
Having a buffer of quota capacity is normal. It’s been around for a long time, and there is nothing inherently wrong with it. In fact, you can probably understand that consistent 100% quota attainment for 100% of reps would either a) be an unreasonable expectation or b) mean that goals can and should be higher.
Where it goes sideways is the dehumanization of sales pros, lack of investment in professional development, and the expectation that our current quota attainment stats (i.e., the percent of AEs who hit quota) are acceptable.
“Bunch of folks miss targets? No big deal. As long as a few crush it we’re good. Lose a few AEs? Meh, no problem. “
That’s not a great culture. And it’s not an environment that will support and encourage AEs to do their best work.
So, if you’re an AE, it’s important to understand what this “layered quota capacity” looks like before you join a sales org.
Knowing how many AEs there are, what quota each of them has, and what the company’s sales goal is are all reasonable questions to ask.
From there you can see how transparent the org is willing to be.