In high school, I set a personal goal to graduate as Valedictorian. Our class ranking was based on GPA. I set my sights on attaining a perfect 4.0 GPA.
But alas, I was not very athletic nor artistic. In my first 2 years, I earned a couple of B’s in Gym and Art.
I graduated as Valedictorian and had won several scholarships but with finished with a GPA of 3.97.
If my GPA goal was a sales quota, I had failed and might have been fired.
Some companies consider quotas to be just like this – any result short of perfection equals failure.
You’ll hear people at these companies saying things like
- Less than half of our reps hit their quota
- We’ve got the wrong sales people
- The reps are just order takers
If you have the wrong sales people, these statementmight be true.
Or maybe… you’ve set quotas too high.
What would happen if you lowered your sales quota to a number that nearly every rep can hit?
We did this when I ran sales at Sharefile:
Every rep was hired into an SDR role and assigned a monthly quota that was the absolute minimum required to keep his job. After 3-6 months of successfully hitting quota, SDRs were promoted to AE roles with the same quota and commission structure.
- SDRs and AEs (Closers) were paid $30K base plus $7K in commissions if they hit quota.
- Anytime a deal closed, quota credit was split between the SDR and the AE.
- Quota was $600 per month for SDRs and AEs.
- On average, 12 sales of $100MRR got a rep to quota.
- Accelerators and multipliers kicked in for reps who sold over quota.
If a rep missed quota, he immediately was put on a PIP. If he missed it the following month he was fired.
Also, for a rep to get off of the PIP, he “owed us” and had to makeup the shortfall from the previous month in addition to his current month’s quota.
Our results were amazing.
- Over 95% of our reps hit quota
- More than 75% sold over 2x quota every month
- Most reps earned over $75K in their first year despite having a $37K OTE package
- Revenues increased from $10M to $25M in 12 months
- Revenues increased to $58M in 24 months
- We profitably scaled the sales team from 50 reps to over 175 in 18 months
- Our employee turnover rate was less than 5%
- Nearly half of our reps had been PIP’d once*
There’s no doubt that it helped that we had the right product at the right time and ran a finely tuned, high-velocity sales operation.
But our commission plan, PIP and low quota were an integral part of this.
Before Sharefile, I thought that quotas should always be set high to give reps a high bar.
I also believed that once most reps hit quota, they would slack off.
It didn’t work that way for us.**
Each month, I would assign my sales managers a team sales goal based on our business plan. This goal was much higher than the sum of individual rep’s quotas.
For example, if we had 20 reps, the total quota would be:
20 reps x $600MRR = $12,000 in new MRR
But our sales team goal might be $20,000 in new MRR.
Then I’d work with the managers to divvy out the goal to every sales rep on the team.
- A sales rep who was brand new might have a goal of $600.
- A sales rep with more experience might have a goal of $1000.
- Our top reps would be challenged to hit $2000 or $2500.
Collectively, we would build a plan to ensure we would hit our goal (and never just hit quota).
We celebrated every win. We set new records month after month. Top reps earned over $150K. Average reps earned less than half of this so there was lots of incentive to improve and move up on the leaderboard.
By consciously creating a culture of accountability, PIP’ing aggressively, and rewarding overachievement, we didn’t need to use quota as a negative incentive to drive behavior. It was simply a tool that allowed us to teach new employees accountability, to refocus employees who were distracted and to get rid of reps who were not a good fit.
Should you lower quotas?
If you are thinking of trying this, you probably have some concerns. You will also likely encounter resistance from your executive team. Here’s how to handle some common objections:
Sales Reps will slack off and do the absolute minimum. Build a team of All Stars, challenge them individually to hit goals above quota and build a commission plan that pays poorly for hitting quota but accelerates for overachieving. Use your commission plan to create a culture that reward outstanding achievement vs. mediocrity.
Reps will be overpaid. Not true. Just create the right commission plan.
Sales will miss it’s number. Here’s the shocker — sales will miss its number anyway if you’ve set arbitrarily unattainable quotas. I see this happen all the time.
But if you try this you may find:
Reps will have less fear of being fired every month. If you think this is not a real fear, you are probably not speaking with your reps. By setting a low bar, you remove this fear and enable them to focus on overachieving.
Reps won’t be pressured into making “bad sales”. These include selling a customer something they don’t need, discounting heavily at the end of the month, or pressuring a client into buying.
Reps will rise up to the challenge to overachieve. If you foster a culture of overachievement, it becomes a self-feeding system. It takes work to build this, but it will transform your entire business.
This is not an easy 1-2-3 step process.
If you lower quotas without adjusting the commissions system to reward overachievement, incorporating strong accountability with PIPs, and providing strong sales management & coaching, you won’t realize the same success we did.
But I encourage you to think about how this might work for you and give it a shot if you dare. Creating this type of culture, sales velocity and performance takes hard work but could become the most rewarding experience of your career.
It was for me and many of my team members.
Feel free to contact me if you’d like to brainstorm how to do this at your company.
*When I first met 1:1 with every sales rep on my new team at Sharefile, I was shocked to hear how many had been on PIPs previously. Even more shocking was how many of them said something like, “I needed it. I was slacking off and needed a kick in the right direction.”
**Actually, this is never the case with All Stars. They are self motivated and driven to overachieve.
For help solving your sales problem, contact me here. I’d love to hear from you.
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