If you’ve ever run a marathon, you know that organizers arrange volunteers or set up signposts after each mile to motivate and cheer participants. If you’re like us, you’ve probably given it a little bit extra on seeing these as you strive to achieve your personal best time.
It’s good to have frequent reminders to drive us to push us that little extra, be it while running a race or closing new deals.
Sales development representatives (SDRs) love having goals, and sales quotas give them that extra bit of motivation to hit their targets.
But, the all-important question here is how frequent should these reminders be? Should you keep your team on their toes by setting daily or monthly quotas? Or should you take a laid-back approach by giving them an annual sales quota and reviewing it at the end of the year?
Which is the best choice to keep your team motivated with their eyes on the finish line?
In this post, we answer these questions by deep diving into the cons of too short and too long sales goals and explain why you need a balanced middle-of-the-road approach. But, before that, it’s time to address the elephant in the room:
Do we even need sales quotas? Can’t I ask my sales team to do their best and be done with it?
Unfortunately, sales doesn’t work that way. Without a sales goal, sales representatives are left in the dark; they don’t have a target to shoot at. As a result, they are likely to get derailed and lose their focus, making the company miss out on critical revenue opportunities.
Let’s go back to the marathon analogy for a sec. When runners advance towards a goal, they experience an adrenaline rush, getting them to speed up.
Similarly, when sales teams see that their efforts take them closer to their goals, they ramp up their sales activities and step up their sales game to hit (and smash) their quotas.
So, it’s certainly worth your time and efforts to set quotas, targets, or incentives to motivate your salespeople to cross the finish line.
Now that we’re on the same page regarding sales quotas, let’s focus on the big question - how frequent should my sales quotas be?
Which is the best option: monthly, quarterly, or annual quotas?
Setting sales quotas is a delicate balancing act.
Too far apart, and your sales teams are likely to become complacent, forgetting their goals for a good part of the year. On the other hand, setting too frequent quotas like weekly or monthly quotas can fail to meet the purpose, especially when you’ve got a long sales cycle that spans several weeks.
We like to call it the Goldilocks syndrome of quotas. Not too long nor too short; it should be just right!
This is why sales organizations across sectors usually go with quarterly quotas.
Quarterly quotas hit the perfect sweet spot. It’s not too far away like an annual quota or too close by, like weekly or monthly quotas. It’s just perfect. Studies reveal that setting quarterly vs annual goals can help your business increase ROI by 31%.
Six reasons how quarterly quotas can benefit your sales team
We’ve boiled the argument down for you. Here are the top reasons why quarterly sales quotas can make your sales teams and your business successful in the long run.
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Keeps your team “in the game”
With a quarterly goal, everyone stays “in the game” throughout the year. For example, if you have set an aggressive yearly goal, your sales reps are likely to get stressed and unmotivated when they fall behind early in the year.
Instead of motivating them, annual quotas stress agents out and cause them to abandon the target when they feel it is not achievable. If quotas are set quarterly, it gives reps a chance to start afresh every three months, even if they fail to meet targets in a quarter.
Another major drawback of an annual goal is that it results in coasting. Top performers who do well in the early part of the year may not put in their full efforts for the rest of the year as soon as their goals are within sight.
With a quarterly sales quota, a sales rep who does well in one quarter is not likely to become complacent, as they have to work harder and smarter to exceed their sales volumes in the subsequent quarter.
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Allows you to celebrate “small wins”
With an annual quota, you either win or lose only once a year. Circling back to our marathon example, just like runners tend to perform better when they can celebrate each milestone, sales teams require frequent motivations and incentives to stay on track.
With a quarterly goal, your team has four opportunities to celebrate their milestones in a year. You can further motivate your team to reach their individual sales goals by offering them monetary incentives or recognition every time they hit their quotas.
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Gives a clear view of the progress of sales reps in real-time
It can be hard to monitor and track your progress when you’re stuck managing the gazillion things that demand your attention during the workday. Short-term quarterly quotas provide you with a natural stopping point. It’s an excellent opportunity for your team to check-in and take stock of how far you have - or haven’t - come.
It also helps sales managers and team leaders redirect their attention to struggling employees by providing personalized one-on-one sales coaching. Doing an annual performance review is likely to be inefficient as any issue you discuss would have occurred a long time back, making it difficult for the sales rep to connect with it. On the other hand, quarterly goals allow you to address issues quickly, helping your sales team refine and optimize their game in real-time.
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Keeps building on the sales momentum
Mentally, it’s easier to tackle a series of smaller goals than achieving one massive annual goal. That’s one of the biggest benefits of quarterly quota setting! Also, when sales reps achieve their goals in a quarter, they get a huge confidence boost that helps them do better in the subsequent quarter.
On the other hand, if they notice that they are struggling to reach their quarterly goals, they can refine their sales strategies for the next quarter instead of having nothing to show at year-end. And no room to course-correct.
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Makes sales goals less likely to be derailed
In today’s dynamic business environment, where things can change overnight (hello, COVID-19 pandemic and subsequent economic turmoil), sales forecasting for 12 months is a really, really complex and unrealistic exercise.
While it’s good to have long-term goals aligned with the big picture, any specific strategy you plan out for the next 12 months has a higher chance of getting obsolete or outdated by the time you start executing them.
A quarterly goal is for a shorter time frame, and you can refine and optimize the plan for the successive quarter, keeping up with changing factors.
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Empowers your sales team to think about goals and targets throughout the year
Quarterly goals keep the targets fresh in the mind of your reps. Unlike annual plans that pop into the minds of agents only during the last quarter of the year, quarterly goals make targets a crucial part of the daily sales process. They push reps to think strategically about what they should do daily to hit their targets. They even provide impetus for reps and sales leaders to discuss where they are and what they need to do to accomplish their goals.
Does that mean monthly or annual sales quotas don’t work?
Well, no. Ideally, the frequency of your sales quotas depends on the average length of your sales cycle. Here’s a rough guideline to help you plan sales quotas:
- If your sales cycle is 30 days or less, as in retail, consumer durables, or other small businesses, you can give your reps monthly sales quotas.
- If your average sales cycle is two to three months, as in SaaS companies, quarterly sales quotas work best.
- On the other hand, if your sales cycles take several months and have multiple decision-makers, then a top-level annual revenue goal might be the best fit for your business.
As you can see, the optimal sales quota period should reflect the length of your average sales cycle. For example, if you try to rush an enterprise customer to close on a monthly cycle, you may lose the deal by alienating the customer or close with a much smaller deal size. So, you’ve got to adjust sales quota periods to align with the current status of your product or business.
Additionally, you can alter the length of sales quotas to match the skills and performance of your sales force. For example, many companies make the mistake of sticking to annual quotas for both experienced sales reps and new hires. For new agents, you need to identify their errors quickly to provide them with the right on-time coaching.
Using annual sales quotas for new reps makes it challenging to monitor rep performance in real-time. A more efficient practice would be to use larger revenue quotas for experienced sales personnel and shorter monthly or quarterly sales quotas for new hires.
With that said, shorter isn’t automatically better. For example, it takes longer to close a deal when entering a new market, and you need to be patient. Having a longer sales quota, say for six months or a year is likely to yield better results in this scenario.
Ideally, the best sales quota frequency aligns with your sales cycle and other sales considerations. You can initially experiment with quarterly sales quotas and then scale up or down, depending on what’s right for your business.
Hit your sales goals with Clari Copilot
Going by the factors mentioned above, you need to customize sales quotas to match your business strategies. Setting sales quotas of the correct frequency is necessary to level up your sales game.
Clari Copilot makes this process easy. It empowers your sales and marketing teams with actionable insights that they can use to increase their conversion rates, close deals, and hit their targets.
Clari Copilot is an AI-powered conversation intelligence platform that unlocks smart insights from every sales interaction. It provides call recording software, real-time sales metrics, customized sales coaching software, game tapes, sales performance analysis, battle cards, and more into one simple, easy-to-use platform.
Schedule a personalized Clari Copilot demo today to hit your sales targets every quarter and empower your sales team.