How Did They Even Get to This Quota?!

I’ve said it as a rep, manager and director. Honestly, it was probably easier to sail across the Atlantic in the 1700s than it is to come up with accurate targets. It wasn’t until I sat in the VP seat that I understood how hiring plans, quota targets and comp plans were done. Anyone in leadership can attest to the pain staking and complex process that goes into this planning starting in August and get finalized RIGHT before Christmas.

Now I was incredibly fortunate in my career that I got to watch THE Sales Operations Jedi Master ☑️Lisa Kelly do her planning. I watched in awe as she walked through these scenarios. I did my best to absorb as much as possible and it was a tremendous learning experience.

The First Step you want to have in place is your conversion models. Understanding the amount of leads and conversion rates is the first step in determining the revenue amount needed. See below for a refresher:

Conversion Model Collapsed to Quarterly Targets

Ok, now I have my lead and opp targets as well as expected ASP. This represents a quota goal of $16.25M which you can calculate if you take the beginning ARR and subtract it from the ending ARR.

As I build my hiring goals I want to consider that 80% of the reps will hit their number. Why do this? I want to protect the company goal by building in a buffer in case there are any down months.  As I roll up my quotas I’m going to take that into account. Furthermore, I want to do this because I need to build in different levels for my front line leaders. Their comp plans will be based off a 90% attainment on the full rollup number.

This gives the business the proper protection and motivation for each level to get to their quota. Not enough cushion means you miss the numbers, have to downsize resulting in a failed year. Too much cushion means you are inflated in your hiring plans and your LTV:CAC is garbage…resulting in layoffs to balance out numbers. Either scenario can have a negative effect on moral and culture which you want to maintain.

So you’ll see in this example I’ve rolled up my reps to drive towards $21m in ARR. See here:

I’ll have to make sure that I have a budget for the headcount growth, then I’m going to work with recruiters (internal and external) on hiring profiles and build a pipeline of talent. Q1 will be important to get my Enterprise AEs in place then the focus shifts to my Mid Market AEs. I’ll also have to coordinate with Enablement to make sure we have proper training in place to ramp quickly.

Once I have these elements in place then I can look at all my variables:

In this plan if I hit 80% of my rep attainment then I have booked $16.81m against a $16.725m target or 101% of quota attainment. I have appropriate spacing for leaders as well with a quota mark of $18.9m. Once you see it all tied together it makes the goals crystal clear

Fall behind the plan? You can analyze where you are missing in the funnel through your rev conversion model. You can then also understand where to point your enablement training to help increase closed won business.

Now this rollup is created in a bubble and things will happen through the year that affect the numbers. Everyone gets this but you want to have a guiding light on how you are going to get to the number. Additionally, having this anchored against a revenue conversion model should provide for more confidence in the overall plan.

So hopefully this helps when the question is asked “How did they get to this quota?!”