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Quotas - why they matter, and where they don't

· quotas

A form of this article originally appeared on the Sales Assembly blog on June 29th, 2019. It's been updated with new info and a fresher perspective - including a quote from PactSafe's Jason Kren that quotas into perspective.

Quo·ta - The share or proportional part of a total that is required from a particular person, group, etc.

/ˈkwōdə/

I’ve never liked the word “quota.” It has such a one-way negative connotation to it. The perception is often that someone somewhere creates a quota, which is then driven into the sales organization as a symbol of your success or failure. Well - I wish there was a better word for it, but I’ve recently discovered that the concept of quotas has never been more important in my life, and probably in yours, too.

Imagine a conversation with a friend that goes like this:

Friend: “I’ve made a decision. Time for me to go on a diet!”

You: “Oh yeah? Good for you! How much weight do you want to lose and by when?”

Friend: “I’m just gonna work hard on watching what I eat and exercising. I’ll lose as much as I can.”

You: “How will you know you’ve succeeded?”

Friend: “When I’m a head-turning Adonis.”

Hmmm...you probably wouldn’t recommend this approach, would you? I mean, it’s hard to get where you’re going if you’d don’t first identify where you hope or need to end up, right?

I’m often surprised by how many entrepreneurs think this way. “Quotas are for salespeople.” “I’m gonna work really hard, maximize our results, go out for funding, then we’ll worry about quotas.” “I’ll know we’re making it when we’re cashing a big A-Round check.” Sounds like the diet conversation. Just recently, I spoke to the CEO of a seed-stage tech company about his company’s quarter:

“Only seven business days left in the quarter. Team going to hit the number?”

There was silence. I think tumbleweed may have blown through the room - but that may have been my imagination.

It’s not just entrepreneurs. Salespeople do this, too. I may or may not have thought this way when I was working the front-lines every day; working hard, but the focus on whether quota would be attained becomes the attention near the end of the quarter.

Let’s think about quotas a little differently. I certainly have - it’s all come full circle for me.

I launched a book back in December. I also incorporated as an LLC (SalesMelon LLC) and have built a business around its concepts in the form of speaking, workshops and consulting. At the time, the question I asked myself (and, ahem, my wife asked as well) was whether this business had the legs to sustain. As soon as we could see that it doesn’t, I’d just go back to being a CRO or COO in a tech company somewhere. But how would I know what those “legs” actually looked like?

Enter the quota.

First, I analyzed my costs. I’m blessed with an incredibly supportive wife, a pile of kids, dogs, cats and other random pets. But those ain’t free. I also needed a budget to determine where I would invest in things like business services, technology, marketing / PR and an assistant. Next, there was the math around what my earnings (before taxes) would need to be to sustain the LLC. I calculated things like how much runway would I have to support the investment required and how much would my earnings need to be to match my prior income as a CRO given the tax treatment differences as an employee versus an LLC.

And out popped the number...aka, my “quota.” For me, the business had to have enough earnings in the first two quarters to nearly break-even at home. Q3 was calculated to attain growth, and Q4 is based on matching my previous income. Next year will begin with my Q4 target as a baseline, but will then include targets which will inform expansion of the business.

For me, it’s fairly dramatic: I’ve got to hit my quota to essentially keep my job.

This process has also reinforced the importance of a predict-the-future worthy forecast and establishing a baseline CRM (I’m using AirTable now, but have grown to where I will be implementing Zendesk Sell before the end of the year, if you were wondering).

Having hit my Q1 and Q2, with a pipeline that has me forecasting that I should also be able to hit Q3, I have some important decisions in front of me. How could I possibly make those decisions without knowing my quota?

On Friday, my mentor (who I spend 30-60 minutes with in deep phone conversation 1x per month) pounded me with this reminder as we discussed a decision I am about to make:

“Todd, do the math! Remember, with every decision you make right now, you are trading your time for dollars.”

Trading your time for dollars...that’s the line right there. Now, more than ever, every hour is worth something. Am I getting a return based on where I need to be to make my quota? Am I investing that time into something that will help me hit my next quarter, or set me up to make my projections for 2020, so I can make the investments to truly build this out?

I am trading time for dollars. The calculation is based on my quota - both my current quota, but also those I must hit in the future.

Jason Kren recently wrote a post that had a couple of important points to keep in mind:

1) “You are not your quota”
2) “There are over 7.5 billion people on this planet. Only a few care about your sales performance.”

No truer words have been written about quotas. A quota isn't a badge. It doesn't serve as a judgment on you as a person.

But it serves an important purpose. As a seller, leader, entrepreneur or in really any line of business, are you thinking about your time that way? You know my vote...

Did you see the news? The Transparency Sale was recognized as the 2019 Best "Business: Sales" book at the 17th Annual Best Book Awards.

 

It's sales kickoff planning season. I'm booking up quickly - but would love to participate in yours. Check out my speaking & workshop pages for more info.

 

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