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Truth: How Your Sales Quota is Set

Ryan Walsh, CEO
Ryan Walsh, CEONov 23, 2020
Just trying to hit quota again…

Do the math.  There are 8 reps on the sales team.  Each one has a $600k quota this year.  So that’s $4.8m in what is typically called quota coverage for the team.  How far off is $4.8m from your sales manager’s quota, though?

And then how many layers of leadership are there before you get to the CRO -> CEO -> investors/board.  Let’s break this down using a simple formula.

Say the chief revenue officer of that org mentioned above has a goal of $10m…

— Individual rep: $600k quota x 6 reps = $3.6m quota coverage for the manager

— The manager (who has quota coverage of $3.6m) has a personal quota of $2.8m.  

— There are 3 managers, so the sales director has $8.4m quota coverage ($2.8m x 3).

— BUT, the director who has $8.4m in quota coverage, has a $6.5m personal quota

— And there are 2 directors (east / west), so that CRO we mentioned has $13m in quota coverage ($6.5m x 2).

— So the CRO has quota coverage of $13m vs. a $10m quota.

That sounds fine, I mean you wouldn’t have just enough deals in your pipeline to hit your quarterly number.  The CRO knows there will be attrition, there are folks on ramp and any number of other issues could crop up.

But if you really peel the layers back on this, there are 36 reps on the team.  So the TOTAL quota coverage is $21.6m.

This example is closer to reality than many folks realize.  But is this good, is this bad, is this a problem?

Yes and no, as the answer isn’t quite so straightforward.

Having a buffer of quota capacity for a sales team is normal, and it’s been around for a VERY long time, well before SaaS has become the rage in tech circles, and there is nothing inherently wrong with the practice.  As stated above, as a sales professional, you should have 30 deals in your pipeline even though you only need to close 8 of them to hit your number.

Where this goes sideways is the dehumanization of sales professionals, lack of investment in professional development, training, and coaching, and the expectation that our current sales attrition rates and quota attainment stats (i.e. % of reps that hit quota) is acceptable.

So the CRO is sitting on over 200% of quota capacity. And we wonder why sales attrition is so high. Lose a few, ok we’re still in good shape.

This can be fueled by outsized expectations of growth at all costs, and is exacerbated by inexperienced leadership.  So sales professionals, what should you do about it, knowing realistically your voice won’t likely change the landscape that you live in.

Our recommendation is to understand what this ‘layered quota capacity’ looks like in an organization BEFORE you join.  

Knowing how many reps there are, what quota each of them has, and what the company’s new sales goal is are all reasonable questions to ask.  Let’s see if the organization’s transparency shines through.

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