Sales Quota

A sales quota is the target or minimum sales volume expected from a sales employee, sales team and/or department, during a defined period. Sales quotas are frequently set in monthly, quarterly and annual allotments and commonly expressed in sales dollars or sales units. When quotas are set effectively, the consistent attainment of quotas will directly and positively impact a company's ability to achieve its overall sales budget or plan. Most sales commission payouts are linked to the attainment of quotas. It is common for sales quotas to increase year over year.

How To Set Sales Quotas

1. Review future, company and department performance goals and budgets. Understand what the sales department must deliver monthly, quarterly and annually in order to achieve its goals.

2. Analyze sales trends for the past two years including dollars, units and product/service information. Understand the causes for sales growth, sales declines and seasonal fluctuations. Examine quota attainment at the representative, team and department level. Consider changes to sales resources and staffing levels.

3. Compare the prior year's performance trends with the future, company and department goals. Determine what growth or decline is expected. Quantify the overall gap between last year's performance and the future, expected performance. Determine the revenue expected from existing customers versus new business.

4. Complete an opportunity analysis. Identify where the best sales opportunities are within your existing customer base and with prospects. Look externally at geographic and industry trends that may impact future sales performance. Familiarize yourself with internal changes that could help or harm sales such as new product introductions or changes.

5. Review the sales expense budget. Determine if your full time equivalents (FTEs) will grow, decline or remain flat. Understand the budget for sales commission expense and cost of sales.

6. Determine if you will "over assign" quota dollars. This is the process of adding a buffer between the sum of your sales quotas and the sales budget. For example, if your sales budget is $10 million, you could set sales quotas to sum $11 million, to add a $1 million buffer. Some sales leaders consider the over assignment, as insurance to improve their chances of achieving sales goals.

7. Determine how you will spread the sales growth or decline including the "over assignment," if applicable, across your sales team. Some sales leaders hold all sales representatives to the same level of quota growth, regardless of territory, skill set or geography. Other leaders tailor the sales quota amounts to individual employee or territory needs.

8. Build a quota model that will allow you to create "what if" scenarios for different quota amounts. Some of the data inputs and outputs will include number of FTEs, sales dollars, expected quota attainment, commission dollars and cost of sales. (Quota models are often built using Microsoft Excel or Access.) It may be helpful to include finance and human resources experts in the quota modeling process.

9. Set reasonable quotas that will lead to the achievement of the overall sales revenue budget while also meeting your sales expense goals.

How to Develop a Multicultural Sales Force

Instructions

1. Work with your human resources staffers or HR consultants to write and implement a policy of cultural diversity that will cover future hires. Circulate the language to all personnel so there's a universal understanding of the company's intention to diversify its work force.

2. Get buy-in from your sales force members to ferret out discomfort, hidden prejudices and biases. Hire a professional to conduct counseling or run workshops on diversity so staffers are offered a safe environment in which to air race, religion, ethnicity and gender issues. Question your own motives to be certain your objectives---and that of senior management---are solid and strong.

3. Explore your community's concentration of minorities to target hires that best suit your customer base and offer the widest pool of sales talent.

4. Work with a recruiter who is fully cognizant of your overarching mission to hire a more diverse sales force. Provide a list of criteria you're seeking---such as bilingual skills, college degrees, sales or industry experience---so employment specialists know you're not just looking to comply with a quota, but seeking highly-skilled salespeople who happen to be of other ethnicities.

5. Put into a place a mentoring system, pairing seasoned sales reps with new hires as soon as your newly diverse sales staff comes on board. Encourage social interaction. Take a tip from firms who have successfully accomplished workplace diversity by holding food sharing days and other events that help employees learn about their new colleagues.

6. Monitor relationships among sales staffers closely to short-circuit potential problems before they explode. Educate all employees on social prohibitions, such as holding a team-building off-site meeting on a Saturday when Jews and Muslims can't attend. Be sensitive to palates at parties, sales conferences and workshops so there's always a vegetarian option for folks whose beliefs prohibit the eating of meat. Draft policy that either prohibits all holiday-specific decorations from the office or invite everyone to add a bit of décor that recognizes Christmas, Chanukah, Kwanzaa, Ramadan and more.

7. Maintain a level playing field. Make certain your desire to integrate multiple cultures on your sales force doesn't wind up polarizing staff because you're giving preferential treatment to one group or another. It took thousands of years for people to learn prejudices, so keep expectations low. Strive to be a business trendsetter and while you're growing your staff, you'll probably wind up with some mighty impressive sales figures in a variety of languages.

How to Develop an Effective Sales ForceDeveloping an effective sales force through evaluation, incentive and training will grow a business steadily. Building a solid sales team starts in the recruiting process and continues with education and ongoing monitoring as the group grows. Effective sales people are given all the resources and information they need to carry out their job as the primary contact with a company's clients. Support and guide a sales force to make them efficient and successful in fueling the advancement of a company..

Instructions1. Recruit and interview candidates for the sales position who have a proven success record and

provide supporting references. Contact corporate headhunters, list available positions online, and ask employees for referrals to find potential sales people.

2. Ask interviewees specifically about their experiences as a member of other sales forces and how the relationship ended. Listen closely to each answer for insight into how the employee perceives their role in the sales force.

3. Select sales people who have energy and a positive attitude about joining the sales force. Pass on the candidates who are projecting past issues and experiences onto the new team. Favor the sales people who seem ready to learn a new system without any resistance to making changes.

4. Present a clearly written set of guidelines and expectations to all new members of the sales force. Ask them to come to you individually with any questions they have with the description of their job.

5. Provide detailed training and make information available to the sales force when new products and sales formats are introduced. An effective sales force knows the ins and outs of everything they sell.

6. Follow up on the guidelines and training with regularly scheduled evaluations that include disciplinary and incentive programs. Denying or supplying money often motivates a sales force better than disciplinary action like title demotions and threats of termination. Be consistent in your positive and negative responses to every member of the sales force.

7. Promote members of the sales team who regularly meet their goals to leadership and training positions. Terminate anyone who has committed multiple violations of company guidelines or is has failed to reach sales goals for two or more consecutive months. The constant attention to detail will refine your sales team to only include the regular producers.

8. Ask the sales force for feedback on how you could help them be more effective at their jobs. Individual sales people may have insights into improving what they do that are helpful to all members of the team. Keep an open mind about making changes to training and guidelines based on the information you receive directly from the sales team.

Extending Credit to Customers of Your Small Business 

Managing credit in your small business hinges around information, communication and control. Before granting credit terms, do your homework and get the information you need to obtain reasonable assurance that you will get paid. Clear communications and a good flow of information and documentation will contribute to a good business relationship with your customers and clients, and follow-up will be a key aspect in your collections and cash flow.

Credit and your small business operations

Buying and selling on credit is a normal part of business. Establishing and maintaining a clear credit policy and following the proper credit practices and procedures should therefore be a fundamental part of your small business operation. Sales and marketing, production and delivery, and customer service are obviously important aspects of your business, and your credit and collections practices round out the operating cycle.

Three key concepts involved in credit are:

Information Communication Control

Since selling on credit is basically agreeing to deliver the products your customers order, or to perform the services they request based on a promise to pay at some future date, you will want to make an informed decision about extending credit, before committing your time and resources.

Clearly communicating your terms to the customer will avoid any misunderstandings later on. Once you decide to extend credit to a customer, the terms should be documented so that they are clear to both parties. It is also important that all persons internal to your small business, whether they work in sales and marketing, production and distribution, or accounting, operate from the same base in terms of credit.

Control involves consistency and follow-up. A credit policy can only be effective if it is carried out in practice. Guidelines should be consistently applied in the sales and billing phase, and enforced through follow-up in the collections phase.

Common credit practices

One of the factors to take into consideration in establishing a credit policy will be the standard practices in your line of business. Your customers may work with 30-day payment terms, which is common in many businesses. While your small business is not obligated to accept terms imposed by your customers, it is important to recognize these standard or common practices. Many businesses operate on a standard pay cycle, issuing payments once a week, for example, based on an accounts payable system that ages invoices and calls up for payment those that are due. In many cases, when the invoices are entered into the system, the due date will be assumed to be, or will default to 30 days.

This 30-day payment period is taken as an example and it varies, depending on the nature of the business, the type of industry, general economic conditions, and individual companies’ financial policies and practices.

You will want to make it easy for your customers to pay you, and provided your small business cash flow permits, it may be acceptable, and even beneficial, to accept the standard terms of your customers.

Or you may be in a business that normally involves payment on cash terms; that is, you receive payment for your sales basically by cash, check, credit or debit card, or electronic transfers of funds. In this case, your credit policy would involve the exceptions, when you would extend credit to a particular customer based on a certain set of circumstances. But even in the case of an exception, the same principles would apply in deciding whether to grant credit to that customer.

Considerations involved in deciding whether to extend credit

The most basic consideration in extending credit is obtaining reasonable assurance that you will in fact get paid. This primarily means knowing who you are dealing with. Credit should not be granted without first having sufficient knowledge of the potential customer and their ability to pay.

The decision as to whether to extend credit to a potential customer of your small business will probably be a function of the amount involved in the potential sale and the probability of continued, ongoing business with that same customer. If the amount of the sale is significant, in terms of your small business, you should do an evaluation before extending credit, even if it is a one-time sale. And if this is a customer with whom you hope to continue doing business in the future, it will be important to first assure yourself of the credit-worthiness of the potential customer, and then to establish clear credit guidelines that are acceptable to both parties. This will enhance your business relationship with that customer, as well as your own reputation as a solid business, for other potential customers in the future.

The decision to grant credit terms obviously has a direct effect on your small business’s cash flow, so it is a decision that merits the necessary consideration. When you are just starting up and are short on cash, it may be more difficult for you to grant credit terms. But at the same time, you won’t want to lose a valuable customer just because they normally work with payment terms of 30 days. So you will need to weigh these factors in your decision. In many cases, credit terms can be negotiated. A basic rule would be not to extend credit to the point where it jeopardizes the solvency of your small business.

There are different spheres in which to evaluate the credit-worthiness of the potential customer. These include an evaluation of the financial situation of the potential customer, the conditions in the market segment in which it operates and general economic conditions, and data related to the company itself and its management.

Financial evaluation for extending credit

A financial evaluation can be performed based on concrete, objective financial indicators that can be obtained from, or calculated based on information contained in financial

statements, annual reports, and other sources. These types of reports may be public or they may need to be requested directly from the potential customer.

In determining a potential customer's ability to pay, some of the financial indicators that can be evaluated from data on the balance sheet include:

overall cash balances ratio of current assets to current liabilities debt to equity ratio capital or net worth

Since the balance sheet represents the financial position as of a given date, it may be advisable to review more than one.

Some indicators from the income statement include:

overall profitability in terms of net earnings ratio of net earnings to sales debt carrying costs, namely interest, as a percentage of total expenses

Here again, it is advisable to review income statements for more than one period, in order to make a decision based on performance over a sufficiently representative period of time.

While acceptable ranges can be applied in evaluating ratios and other financial indicators, the general idea is to have a clear picture of the potential customer's overall financial health.

Economic and market considerations for extending credit

Overall economic conditions, and conditions in your potential customer’s industry or market are factors that should enter into your evaluation. A general economic downturn affects everyone, but may affect certain companies or businesses more quickly or more severely than others. Some markets may be susceptible to cyclical fluctuations that affect a particular company’s profitability and cash flow. And markets are constantly evolving and changing, benefiting some companies and leaving others at a disadvantage.

Your small business may be local and subject to economic and market conditions in a relatively limited area or sphere of activity. Or you may be global and subject to a wide range of factors in an on-line, interrelated business world that could potentially affect your business.

This is an area that may be difficult to quantify in concrete terms, since there are so many variables that enter in, and that are often intertwined. The idea is to maintain a constant awareness of prevailing economic and business conditions, paying particular attention to how these fluctuating conditions affect your own business and that of your potential customers.

Considerations regarding the customer company

Some of the questions that may form part of a credit evaluation of a particular company include the following:

Are you familiar with the company? Is the company generally recognized in your market, industry, or community? How long has the company been in operation? Does the company have a physical address? Do you know the management? Who are the owners? Has the company undergone a change of ownership? Has the company undergone a change of management or a restructuring? Is the company in bankruptcy or has it declared bankruptcy in the past?

One of the best ways to gain assurance regarding a company’s ability to pay is through references, especially from people you know and trust, or from other companies in your same line of business. There are credit reporting agencies that provide information regarding potential customers, generally for a fee. And it is not unreasonable to directly ask a company for references, if you are unable to obtain them from another source.

Monitoring your credit policy

The establishment of a credit policy and a customer credit evaluation are not one-time-only exercises. You may need to review your credit policy periodically, based on how your business is doing in terms of cash flow and profitability. Any changes that you need to make in your policy would need to be communicated to your customers, possibly negotiating new credit terms.

Your credit policy does not necessarily mean granting the same terms to all your customers, and does not have to remain constant over time. It is important to consistently apply your credit terms once they are established. But credit is extended based on an evaluation of the customer’s ability to pay. And this may change. Each customer’s credit profile should be updated periodically, especially as new information comes in, and as a customer’s payment history evolves. Credit may need to be restricted on a customer who consistently pays late, or who has accumulated a significant unpaid balance.

Summary

A credit policy based on solid information and a thorough evaluation, which establishes credit terms that are openly communicated to all parties involved and that are consistently applied and controlled, will facilitate your collection process, your cash flow, and ultimately the success of your small business.

Howard Sheth Model

The Howard Sheth model, serves as an integrating framework for a very sophisticated comprehensive theory of consumer behavior. It should be noted that the authors actually use the term buyer in their model to refer to industrial purchases as well as ultimate consumers. Thus, it can be seen that their interests was to develop a unified theory useful for understanding a great variety of behaviors.

The model attempts to depict rational brand choice behavior by buyers under conditions of incomplete information and limited abilities. It distinguishes three levels of decision making:

1) Extensive problems solving – early stages of decision making in which the buyer has little information about brands and has not yet developed well defined and structured criteria by which to choose among products (choice criteria).2) Limited problems solving – in this more advanced stage choice criteria are well defined but the buyer is still undecided about which set of brands will best serve him. Thus, the consumer still experiences uncertainty about which brand is best.3) Routinized responses behavior – buyers have well defined choice criteria and also have strong predispositions toward the brand. Little confusion exists in the consumer’s mind and he is ready to purchase a particular brand with little evaluation of alternativesThe model borrows from learning concepts to explain brand choice behavior over time as learning takes place and the buyer moves from exclusive to routinized problem solving behavior. Four major components are involved (1) input variables, (2) output variables (3) hypothetical constructs and (4) exogenous variables.

Input variables:

Input variables are depicted in the left portion of the model as stimuli in the environment. Significance stimuli are actual elements of brands that the buyer confronts while symbolic form, such as in advertisements. Social stimuli are generate by the social environment including family and groups.

Output variables: The five output variables in the right hand portion of the model are buyers’ observable responses to stimulus inputs. They are arranged in order from attention to actual purchase and are defined as follows:

Attention – the magnitude of the buyer’s information intake.

Comprehension – the buyer’s store of information about a brand.

Attitude – the buyer’s evaluation of a particular brand’s potential to satisfy his of her motives.

Intention – the buyers forecast of which brand he or she will buy.

Purchase behavior – the actual purchase act, which reflects the buyer’s predisposition to buy as modified by any inhibitors

Hypothetical constructs:

A number of intervening variables are proposed represented by hypothetical constructs in the large rectangular central black box shown. They are categorized into two major groups: (1) perceptual constructs dealing with information processing and (2) learning constructs dealing with the buyer’s formation of concepts

The three perceptual constructs of the model can be described a as follows:

Sensitivity to information – the degree to which the buyer regulates the stimulus information flow.

Perceptual bias — distorting or altering information.

Search for information — active seeking of information about brands or their characteristics

The buyer’s six learning constructs are defined as:

Motive – general or specific goals impelling action.

Brand potential of the evoked set – the buyer’s perception of the ability of brands in his or her evoked set (those that are actively considered) to satisfy his or her goals.

Decision mediators – the buyer’s mental rules for matching and ranking purchase alternatives according to his or her motives.

Predisposition – a preference towards brands in the evoked set expressed as an attitude toward them.

Inhibitors –environmental forces such as price and time pressure which restrain purchase of a preferred brand.

Satisfaction – the degree to which consequences of a purchase measure up to the buyer’s expectations for it.

The Dos and Don'ts of Extending Credit to Customers

As business owners, we strive to make it as easy as possible for our customers to purchase our products or

services. Most of us accept credit cards and many of us also extend credit terms as a way to increase sales

and build loyalty.

It's the largest use of capital from business to business and remains the number-one alternative to personal

and small business loans. In fact, the Small Business Administration reports that business extension of

credit is the single-largest source of small business lending in the United States today.

While extending a credit term by as little as 30 or 60 days is just like offering an unsecured loan, it's a risk

most of us are willing to take. We're simply providing goods or services in return for a promise to pay.

But as many business owners have learned during these tough economic times, promises are easily broken.

So before you decide to extend credit to your customers, review this checklist.

What You Should Do

Do establish a credit policy that will determine who you'll extend credit to, how much credit you'll

extend, and how you'll monitor that credit once it's been extended.

Do develop a thorough credit application that includes trade references, banking information, credit-

check authorization, terms and conditions, and disclaimers.

Do pull a consumer credit report from one of the major credit reporting agencies to determine the

creditworthiness of your customer.

Do exchange payment data with consumer and business credit bureaus so you can reduce

customer late payments and defaults and improve collections.

Do offer several options in your customer payment methods, such as online bill pay, payment by

mail, and payment by phone.

In addition, be sure to look at the amount of business a particular customer gives you. Offering a

customer a credit limit because it brings in a lot of revenue for your business is a smart move. If it

also has a long history of supporting your business, then that customer will be more likely to pay its

invoices.

What You Shouldn't Do

Don't extend credit without putting your credit terms in writing.

Don't extend credit if your business doesn't have significant cash flow.

Don't extend credit until you become fully aware of the laws governing consumer credit.

Don't extend credit limits that are greater than the risk your business can afford to take.

Don't extend credit to every customer that your business acquires.

Don't extend credit unless you have a collection policy in place that can manage and protect your

accounts receivable.

The success of any business largely depends on the acquisition of customers. Once you've been established long enough to generate solid cash flow, you can begin to extend credit to some customers.

While cash is king, providing credit as an option can benefit your business in several ways, including greater

customer loyalty and sales that may increase by as much as 50 percent. Before you make a decision, you

may also want to consider asking customers for additional requirements, such as down payments and

personal guarantees.

And remember: Despite the risks involved, the benefits of extending credit far outweigh the disadvantages.

Territory Planning

There are many aspects to creating a full blown territory sales plan.  However, if you have never written one, where and how to start many be confusing.  While a full blown plan description is longer than a blog post, (Download this tool kit for help and a detailed White paper) I will try and hit the highlights.

Whether you use slides, spreadsheet, or a document is up to you, but the key is the data that you need to turn into

information.  So where do you start?

First, analyze your territory / quota / business

o What are my accounts?  How much have they spent?  What else could they or should they

buy?

o How am I doing against quota?  Where did I get my business?

o How is my pipeline?  What are my targets?

o create a good list to prospect from including prospects, customers and targets

Next, look for patterns

o Are there verticals that i am winning more than others? (marketing may dictate this)

o is there common “Pain” or business issues I am solving? (this may be specific based on the

product suite)

o Are there common buyers that I am getting to?

o Are there specific products that I am selling more than others?

o Are these because of the market or because I am more comfortable selling these accounts?

Next, identify the help that you need

o Internal resources

o External resources (Partners etc.)

o Resources inside a prospect or customer

Now, identify that actions / activities you need to complete

o Look at things like meetings / demos / conversations / dials

If it takes 5 dials to have a conversation, and 2 conversations to get a demo and 2

demos to get a meeting and 4 meetings to get a deal… Now you can see how much

activity it will take to hit your number

Now, build the plan

o What activities when with what desired outcome?

o What next steps and how many activities by when?

o Why are you doing all of these actions?

Write it out and let someone read it

Make sure you can follow it

Look at it everyday or week

If you don’t plan the work, you can’t work the plan.  Winging it is the best way to miss your number.  Good luck and

Good Selling!