Building Your Sales Quota from the Bottom Up

by Keith Mintzer

01.15.2021

How to Set a Realistic 2021 Sales Quota

Predictability, in the age of modern B2B sales, is often hard to come by.

Each new year brings new challenges. Changes in the local marketplace, tectonic technological shifts, broader economic factors, and even social circumstances can all play a role in your sales outcomes.

However, companies with well-defined sales processes do better than those that don’t. And with the pressure from management to offer profitable growth, the financial team must leverage a well-defined quota to lend a trustworthy, actionable sales plan. Read on to learn how to calculate your 2021 quota using historical sales performance, market conditions, and other factors.

Use History to Inform Your Sales Pipeline and Set Milestones

Ultimately, the best benchmark for future performance derives from historical sales. The first step to calculate your rolling six-month pipeline is to look at the prior six months in sales performance.

Start by taking a critical look at your pipeline for the last six months and how well you performed against it. This gives you an accurate description of where you stand.

Define this pipeline with quantitative milestones in 10% increments. For this, you’ll need to assess what your client will spend over the next three to six months.

Market Size and Location Help Determine Your Sales Ceiling

The next consideration, market size, is a significant determiner of the volume of sales you can expect to make—at maximum.

Depending on the size of the companies you target, small, mid-size, or enterprise, look at the volume of these businesses located within 50 miles of your geography. Assess your estimated IT spend as well. If the information isn’t readily available, data partners like Gartner, Exact Data, and PitchBook can provide such services.

Calculate How Many Leads You Need to Hit Your Quota with This Technique

Your solution’s price point will give you an idea of how many deals you’ll need in your pipeline to hit your targets.

Generally, one can expect about 1/3 of deals in your pipeline to convert to sales. For example, if you have a $1 million quota and your average selling price is $20,000, then you’d need to win 50 deals a year to make that quota. So to close 50 deals, you’d need roughly 150 opportunities.

Finally, your sales cycle timeline determines the length of time you have to gather and process your opportunities. Most B2B sales cycles last between three and nine months, but yours may vary.

Amend Your Sales Goals to Reflect the “New Normal”

It’s unreasonable to expect to outperform the market consistently. And today, there’s no more relevant and predictive market condition than the ongoing coronavirus pandemic.

COVID-19 has had significant ramifications on two work-related areas:

  • Workplaces: Employees are working from home, which means limited face-to-face meetings. Between 48-49% of solution research is conducted remotely, with 22% now taking place on a self-service basis, according to research from McKinsey. Purchasing leans even more heavily on self-service at 36%, with only 20% conducted in-person.
  • Budgets: Because of the pandemic, many businesses have postponed projects, resulting in decreased budgets. According to Trust Radius, 49% of surveyed IT software buyers reported that spending decreased either substantially (21%) or a little (28%).

Proper Planning Brings More Predictable Results

While the future is always uncertain, assessing the right range of variables makes the current B2B purchase cycle much more predictable. And defining your market potential is merely the first step towards reaching it.

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TSRM staff photo: Keith

Keith Mintzer

Keith Mintzer is the co-founder and managing partner at TSRM. Full Bio

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