Article
How to set a sales quota for SaaS Sales Development Reps
quotapath.com
Quoted on this wiki
Every place a page here uses this source, in the order the words come in it.
Opportunities “If they set the meeting and pass it off to a sales rep without any qualifying, then a Demo Set quota might be ideal.” Examples: Demos Set, Demos Held, SQLs (Sales Qualified Leads), Sales Accepted Opportunities, Pipeline Opportunities
Unless you subscribe to the ‘guess and check’ methodology of quota setting or you’re a brand new sales organization, there’s going to be some math involved in setting quotas. “Here’s the formula that I follow:Activity x conversion rate = Opportunities x close rate = # of Closed/Won deals x average contract value = Revenue” Or working backward:Revenue / average contract value = # Closed/Won deals / close rate = Opportunities / conversion rate = Activity
In Funnel math
What it is: For the sake of this post, “activity” means anything that the SDR has complete control over and can vary depending on their level of effort. “Examples: Number of cold calls made, number of emails sent, number of new companies prospected” When to use it: As with any sales quota, you will get the results that you compensate for. So managers should use activity as a quota when your SDRs have low activity and you need it to increase. If, for example, your SDRs are ‘whale hunting’ (only going after theoretically high-value accounts or contacts), adding in an activity quota can improve your quantity of opportunities.
In Metrics
Unless you subscribe to the ‘guess and check’ methodology of quota setting or you’re a brand new sales organization, there’s going to be some math involved in setting quotas. “Here’s the formula that I follow:Activity x conversion rate = Opportunities x close rate = # of Closed/Won deals x average contract value = Revenue” Or working backward:Revenue / average contract value = # Closed/Won deals / close rate = Opportunities / conversion rate = Activity
Here’s the formula that I follow:Activity x conversion rate = Opportunities x close rate = # of Closed/Won deals x average contract value = Revenue “Or working backward:Revenue / average contract value = # Closed/Won deals / close rate = Opportunities / conversion rate = Activity” Conversion rate is the % of activities (calls, emails, chats, tradeshow leads, etc.) that turn into what you’ve determined to be an opportunity.
While sales quotas are generally just based on how much revenue the rep generates, there are several different ways that SaaS companies set SDR quotas. These typically fall into three buckets: “Oftentimes Sales Development Rep quotas are based on more than one of these buckets.” Need help figuring out what your team’s quota should be?Book a free consultation with Graham Collins, Head of Growth, or try our free Sales Compensation Calculator.
Opportunities “How far along in the sales process you judge your SDRs depends on how involved they are with the sale.” Examples: Demos Set, Demos Held, SQLs (Sales Qualified Leads), Sales Accepted Opportunities, Pipeline Opportunities
Opportunities “If they set the meeting and pass it off to a sales rep without any qualifying, then a Demo Set quota might be ideal.” Examples: Demos Set, Demos Held, SQLs (Sales Qualified Leads), Sales Accepted Opportunities, Pipeline Opportunities
Opportunities “If the SDR does a discovery call or even a demo, then compensating on the number of pipeline opportunities would be better.” Examples: Demos Set, Demos Held, SQLs (Sales Qualified Leads), Sales Accepted Opportunities, Pipeline Opportunities
Opportunities “Opportunities can mean any number of different things, but this is the placeholder between activity and revenue.” Examples: Demos Set, Demos Held, SQLs (Sales Qualified Leads), Sales Accepted Opportunities, Pipeline Opportunities
What it is: Opportunities can mean any number of different things, but this is the placeholder between activity and revenue. This can be as early in the pipeline as a set demo or as late as a sales qualified opportunity. How far along in the sales process you judge your SDRs depends on how involved they are with the sale. If they set the meeting and pass it off to a sales rep without any qualifying, then a Demo Set quota might be ideal. If the SDR does a discovery call or even a demo, then compensating on the number of pipeline opportunities would be better. “Examples: Demos Set, Demos Held, SQLs (Sales Qualified Leads), Sales Accepted Opportunities, Pipeline Opportunities” When to use it: If you need a proxy for Closed/Won revenue, I would recommend using opportunities as your quota. It’s a good mid-point between activity and revenue because SDRs feel they have control over their performance and there is a value-add to the organization.
Activity “What it is: For the sake of this post, “activity” means anything that the SDR has complete control over and can vary depending on their level of effort.” Examples: Number of cold calls made, number of emails sent, number of new companies prospected
What it is: For the sake of this post, “activity” means anything that the SDR has complete control over and can vary depending on their level of effort. “Examples: Number of cold calls made, number of emails sent, number of new companies prospected” When to use it: As with any sales quota, you will get the results that you compensate for. So managers should use activity as a quota when your SDRs have low activity and you need it to increase. If, for example, your SDRs are ‘whale hunting’ (only going after theoretically high-value accounts or contacts), adding in an activity quota can improve your quantity of opportunities.
Examples: Number of cold calls made, number of emails sent, number of new companies prospected “So managers should use activity as a quota when your SDRs have low activity and you need it to increase.” When not to use it: Because there is no intrinsic value to cold calls and cold emails, I would never recommend using activity as your sole quota metric.
Examples: Number of cold calls made, number of emails sent, number of new companies prospected “If, for example, your SDRs are ‘whale hunting’ (only going after theoretically high-value accounts or contacts), adding in an activity quota can improve your quantity of opportunities.” When not to use it: Because there is no intrinsic value to cold calls and cold emails, I would never recommend using activity as your sole quota metric.
When to use it: As with any sales quota, you will get the results that you compensate for. So managers should use activity as a quota when your SDRs have low activity and you need it to increase. If, for example, your SDRs are ‘whale hunting’ (only going after theoretically high-value accounts or contacts), adding in an activity quota can improve your quantity of opportunities. “Because there is no intrinsic value to cold calls and cold emails, I would never recommend using activity as your sole quota metric.” Opportunities
Examples: Number of cold calls made, number of emails sent, number of new companies prospected “As with any sales quota, you will get the results that you compensate for.” When not to use it: Because there is no intrinsic value to cold calls and cold emails, I would never recommend using activity as your sole quota metric.
Examples: ARR, MRR, Revenue, Number of Closed/Won deals “Using revenue as a quota is most effective when you can directly attribute your SDR’s efforts to a deal closing.” When not to use it: You want to empower your SDRs to control of their destiny (and paychecks). You also want the work they do to have a tangible impact on the Closed/Won deals. Therefore if your sales cycle is longer than 90 days, it’s hard to attribute your SDR’s efforts to those deals. You can go an entire quarter and not know if you need to change your SDR’s behaviors, target accounts, etc. Additionally, if your organization is closing 6 figure enterprise deals at a rate of one to two per quarter, I would urge you away from using revenue as a quota for SDRs for similar reasons.
Opportunities “If the SDR does a discovery call or even a demo, then compensating on the number of pipeline opportunities would be better.” Examples: Demos Set, Demos Held, SQLs (Sales Qualified Leads), Sales Accepted Opportunities, Pipeline Opportunities
Examples: Demos Set, Demos Held, SQLs (Sales Qualified Leads), Sales Accepted Opportunities, Pipeline Opportunities “It’s a good mid-point between activity and revenue because SDRs feel they have control over their performance and there is a value-add to the organization.” When not to use it: If your sales reps close nearly every opportunity handed to them, you’d be better off using revenue as your metric. The same applies if your sales cycle is transactional or very short (<5 days); revenue or number of Closed/Won opportunities is a better metric for you.
Activity “What it is: For the sake of this post, “activity” means anything that the SDR has complete control over and can vary depending on their level of effort.” Examples: Number of cold calls made, number of emails sent, number of new companies prospected
What it is: For the sake of this post, “activity” means anything that the SDR has complete control over and can vary depending on their level of effort. “Examples: Number of cold calls made, number of emails sent, number of new companies prospected” When to use it: As with any sales quota, you will get the results that you compensate for. So managers should use activity as a quota when your SDRs have low activity and you need it to increase. If, for example, your SDRs are ‘whale hunting’ (only going after theoretically high-value accounts or contacts), adding in an activity quota can improve your quantity of opportunities.
Build a Comp Plan “While sales quotas are generally just based on how much revenue the rep generates, there are several different ways that SaaS companies set SDR quotas. These typically fall into three buckets:” Oftentimes Sales Development Rep quotas are based on more than one of these buckets.
While sales quotas are generally just based on how much revenue the rep generates, there are several different ways that SaaS companies set SDR quotas. These typically fall into three buckets: “Oftentimes Sales Development Rep quotas are based on more than one of these buckets.” Need help figuring out what your team’s quota should be?Book a free consultation with Graham Collins, Head of Growth, or try our free Sales Compensation Calculator.
Examples: Number of cold calls made, number of emails sent, number of new companies prospected “So managers should use activity as a quota when your SDRs have low activity and you need it to increase.” When not to use it: Because there is no intrinsic value to cold calls and cold emails, I would never recommend using activity as your sole quota metric.
“During my tenure, the sales quota shifted a few times depending on company needs — and with it, the SDR quota shifted.” For managers trying to do sales quota management and those who are creating a compensation plan for SDRs for the first time or wondering how to re-design your company’s sales development compensation plan, here are a few ways to think about setting quotas that set your reps up for success.