A sales quota is a sales target that is assigned to a salesperson, sales team or distribution partner. These act as goals that set expectations and impact compensation such as commissions and incentives. The following are common types of sales quota.
RevenueThe most common type of quota is based on revenue for a quarter or month. Industries with long selling cycles may use annual quotas. In many cases, commissions are designed such that salespeople who reach quota receive far more compensation than those who are under quota. A quota may consider a large number of factors such as the difficulty of selling a particular product in a particular territory.
Net RevenueWhere prices are negotiated, sales commissions may be based on net revenue. This gives salespeople incentive to negotiate a higher price and to upsell high margin items.
Monthly Recurring RevenueSales that involve recurring payments such as a telecom services contract may base quotas on monthly recurring revenue (MRR). In such cases, commissions may be based on the annual payment value of the contact.
Volume QuotaQuotas based on the number of units sold. For example, a software salesperson may have a quota based on user licenses or subscriptions.Next: Sales Quota
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