Quota
KWO-tuh
The revenue target assigned to a salesperson for a specific period. The number they must hit to earn full commission.
Quota is the revenue target a salesperson is expected to close in a period, usually a quarter or a year. Hit quota, earn full on-target earnings. Exceed it, earn accelerators. Miss it, earn less and potentially lose your job.
Setting quota is part science, part art. Too low and you overpay for underperformance. Too high and you demoralize the team, increase turnover, and lose your best reps to competitors who set fair quotas. The standard benchmark is that a salesperson should carry a quota of 4-5x their OTE. If a rep's OTE is $200k, their annual quota should be $800k to $1M.
Quota attainment across the team tells you more about your business than any individual rep's performance. If 80% of the team hits quota, quotas are set right and the product sells. If 20% hit quota, either quotas are unrealistic or you have a product, market, or enablement problem.
Examples
A VP of Sales sets annual quotas.
The company needs $20M in new ARR. There are 25 account executives. Not all will hit quota, so the VP assumes 75% attainment and sets individual quotas at $1.07M each. Total quota load: $26.7M. Expected result at 75% attainment: $20M.
A rep evaluates a job offer.
The offer: $150k base, $150k variable, $300k OTE. Quota: $1.5M annual. Quota-to-OTE ratio: 5:1. Average deal size: $50k. That means closing 30 deals per year, or about 2.5 per month. The rep checks if the pipeline supports that volume.
A team misses quota across the board.
Only 3 of 15 reps hit quota in Q1. The VP investigates and finds that pipeline generation dropped 40% because the BDR team was restructured. The problem is not the reps. It is the top of the funnel.
In practice
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Frequently asked questions
How do you set the right sales quota?
Start with the revenue target. Divide by the number of reps. Add a buffer for attainment (typically assume 70-80% of the team hits quota). Validate against historical deal size and pipeline data. A quota should be challenging but achievable by a strong performer.
What is a good quota-to-OTE ratio?
4:1 to 5:1 is standard. A rep with $250k OTE should carry $1M to $1.25M in annual quota. Below 3:1 means you are overpaying for sales capacity. Above 6:1 means quotas may be unrealistic and you will have retention problems.
Related terms
The percentage of quota a salesperson or team actually achieved. The scorecard for sales performance.
The total compensation a salesperson earns if they hit 100% of quota. Base salary plus full variable commission.
The percentage of revenue a salesperson earns for closing a deal. The variable component of their compensation.
The ratio of total pipeline value to quota. Tells you whether you have enough opportunities to hit your number.
A prediction of how much revenue the sales team will close in a given period. The number the CEO gives to the board.
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