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What are the benefits and drawbacks of using different quota types, such as revenue, volume, or profit?

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Quotas are numerical goals that salespeople or sales teams are expected to achieve within a certain period of time. Quotas can be based on different metrics, such as revenue, volume, or profit. Each type of quota has its own benefits and drawbacks, depending on the context and objectives of the sales organization. In this article, we will explore some of the advantages and disadvantages of using different quota types, and how to choose the best one for your situation.

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1 Revenue quota

A revenue quota is the most common type of quota, and it measures the amount of sales generated by a salesperson or a sales team. Revenue quotas are easy to calculate, track, and communicate, and they align with the overall goal of increasing the company's income. However, revenue quotas can also have some drawbacks, such as ignoring the profitability, quality, or customer satisfaction of the sales. Revenue quotas can also create unhealthy competition, pressure, or discounting among salespeople, especially if they are set too high or too low.

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Ricardo Chang

| Strategic Business Manager | BDM | Sales & Commercial | B2B & B2C | Disruptive Innovator | Mentor
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Las cuotas de ingresos son, de hecho, uno de los tipos más comunes de cuotas de ventas y se utilizan para medir la cantidad de ventas generadas por un vendedor o un equipo de ventas. Este enfoque se centra en los ingresos generados a través de las ventas realizadas, lo que permite evaluar el rendimiento financiero y la contribución a los objetivos de la empresa.

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Laura Kate Marlar

Finance & Insurance Manager ~ Imagine the possibilities..
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Business is a mindset, not a race. Sales quotas are necessary mile markers. We need them to measure speed & distance. There are some uncontrollable factors that come in to play, such as the pandemic, less traffic, etc. There are setbacks that can keep us from obtaining goals. We need to strive the best that we can to reach those goals, but also make sure we look at factors such as number of transactions, conversion. If traffic was down, but average dollar increased, and units increased. That means that we controlled what we could. That is how I measure the fairness of quotas. I would rather my team have integrity and do the best they can & miss the mark, than do things against the rules to reach those goals. It can and does happen.

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2 Volume quota

A volume quota is based on the number of units or transactions sold by a salesperson or a sales team. Volume quotas are useful for motivating salespeople to sell more of a specific product or service, or to penetrate a new market or segment. Volume quotas can also help to reduce inventory costs, increase market share, or generate referrals. However, volume quotas can also have some drawbacks, such as sacrificing the revenue, margin, or value of the sales. Volume quotas can also encourage salespeople to focus on quantity over quality, or to neglect other aspects of the sales process, such as follow-up, cross-selling, or upselling.

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3 Profit quota

A profit quota is based on the amount of net income or margin generated by a salesperson or a sales team. Profit quotas are useful for rewarding salespeople for selling high-value or high-margin products or services, or for reducing costs or expenses. Profit quotas can also help to improve the financial performance, efficiency, or sustainability of the sales organization. However, profit quotas can also have some drawbacks, such as being difficult to calculate, track, or communicate, especially if there are complex or variable costs involved. Profit quotas can also discourage salespeople from pursuing low-margin or long-term opportunities, or from investing in customer relationships, training, or innovation.

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4 How to choose the best quota type

Choosing the best quota type for your sales organization is a decision that depends on several factors, such as industry, product, market, strategy, culture, and resources. When making this decision, consider questions such as your main objective or priority for your sales organization, the key drivers or indicators of your sales performance, and how you measure, monitor, and report your sales results. You may also use a combination of different quota types to capture different aspects of your sales performance. However, avoid using too many or too complex quota types as this could confuse or demotivate your salespeople. Additionally, review and adjust your quota types regularly based on changing market conditions, customer needs, and competitive advantages.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Russell Piggott

Senior Sales Rep, representing Mayfair Hotel Supply and UMF/PerfectCLEAN
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There needs to be a recognition of account retention. You have to keep the business in order to grow it. Slow and steady. Keeping an account active, even if it drops in business, is still key to growing it down the road. Only rewarding on growth, profit and so on, causes the accounts that did well last "year", that have dropped off this year, to be neglected and abandoned and sloffed off to another rep, so it doesn't pull down your territory goal attainment.

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What are the benefits and drawbacks of using different quota types, such as revenue, volume, or profit?

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1 Revenue quota

2 Volume quota

3 Profit quota

4 How to choose the best quota type

5 Here’s what else to consider

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