The Small Business Sales Quota Dilemma

Same Old QuotasEarlier today, I read “Why are Half of All Sales Reps Still Missing Quota in a Booming US Economy?” and found the article itself, and the comments within LinkedIn around the article, a little disturbing. Almost all the points were towards the reps themselves and not the businesses… Let’s face it: if any business is having more than 50% of their reps miss their sales quota, something is very wrong! No business should ever have 50% or more of their reps missing numbers, and if they are, that is a failure on the business’s part—period.

As many businesses gear up for their yearly planning sessions, now is the time to really look in the mirror before developing new quotas and truly understand the business itself. Again, if 50% or more of your sales team missed their quotas last year and are going to miss this year, you truly need to ask “why?” Is it talent, training, something else within their business, or were their quotas improperly set to begin with? As leadership, it is critical to look beyond your own thoughts of what a revenue target “should be” and bring into consideration other items such as the industry, economy, and job market. Setting the stage, it is safe to say that most leadership believe that the reason reps miss their number comes down to the rep’s ability to hit their personal quotas and not that targets were improperly set to begin with. This is a scenario we play out year over year… As a result, leadership’s plan for hitting the next year’s revenue target simply comes down to either cutting staff and bringing in new talent or increasing headcount. Regardless of the strategy, is it really viable? Well, like we said earlier, it’s a strategy that plays out year over year in small businesses, with the same unfortunate results. This is almost the definition of insanity, yet the cycle always continues.

A majority of reps missing their quotas is not a talent issue. Plain and simple: there is a fault in the business that leads to the miss. Again, starting backwards, most business leadership create a revenue target number based on what they think is a viable revenue target. Some literally make up a revenue number based on what “they believe” is a proper revenue target for the business to hit, and others slap a percentage increase over last year’s numbers and then essentially break up quotas based on a number they created… Very few truly take a look in the mirror to reflect on last year’s performance, industry, economy, and other items before coming up with a realistic revenue target. Regardless of the method, here are a few things that should be considered before coming up with a revenue target.

Current Situation – It starts with understanding the current team and the “why?” around performance. Again, we believe that if 50% or more of your reps are not hitting there number, there is something fundamentally broken within the business. Now is the time to reflect and try to understand the reason. You should ask yourself: Is it truly a talent thing? Did your sales management hire the right quality reps? Is the proper training in place? Is there a brand perception problem? Is there a broken process? The key is to identify areas of improvement for the year ahead, but to also recognize that changes do not happen overnight… Meaning, when creating a revenue target, the ramp up time for these changes need to be taken into consideration.

Talent Acquisition – Talent is a big one. Going back to some of the comments we saw around this article shared on LinkedIn, most pointed to talent or lack of talent for the reason reps are missing their numbers. Honestly, this could be the case, but that means that changes must be made around the way your organization does talent acquisition moving forward. However, you also have to recognize the current job market as well… We are in a time where there are more open positions than unemployed looking for jobs. This essentially translates into the hard fact that finding good talent is difficult to do. This means that if part of your plan going into the New Year is to either trim current reps and replace them with newer “A” talent, or simply increase head count, it is going to take time… Again, something that needs to be taken into consideration.

Current Economy – It is astounding that even the biggest companies out there do not really take the economy into consideration. As an example, in the economic downturn of 2009, most businesses quite frankly ignored the signs of a down economy and stuck to their guns for revenue targets. As a result, they missed—and some missed by large margins. This was a disaster for the stock market, as investors were quick to pull their investments from these organizations. And the rest is history. Not that something like 2009 could have been completely avoided, but the companies that truly looked at the economy and made proper adjustments did do much better from a numbers standpoint at the end of the day.

Current Industry ­– Again, it truly amazes us when businesses refuse to look at their current industry’s performance. A perfect example is the cable industry… Consumers are cutting the cord at alarming rates, and businesses such as Comcast are all but completely ignoring the fact and continuing to raise rates year over year. Time will tell the true fate of the cable industry, but it’s not a good outlook. Sometimes there are external pressures that come into play with specific industries, and unfortunately, too many businesses ignore the signs which, at times, can devastate them completely. Could this be the root cause of a decline in numbers? If so, simply increasing quotas or finding new talent is not going to fix the issue.

Pricing – We cringe at this strategy. Some businesses believe that in order to make up the gap in revenue loss, they should simply increase the price for their products and services. There is a right way and a wrong way to do price increases… We do believe that, at times, you do need to increase prices; if Coke was still going for a nickel, they would have gone out of business a long time ago… but there needs to be a strategy to the increase. Also, you need to understand how your market will respond. Going back to the example of Comcast, their market simply is not responding well to their annual price increases, and they are losing customers in record numbers.

At the end of the day, every business wants to see increasing numbers year over year, and no business wants to set a target lower than the year before. However, the way your business sets its yearly revenue targets has more of an effect on the business than you may think. First is the overall attitude of a business, as a business that is winning acts much different vs. when they are losing; a winning attitude is just as contagious as a losing one. This brings us back to the fact that if you are having a majority of your team missing their numbers, you can guarantee the morale of the team is low—negativity breeds negativity. Then there are the financial repercussions, as when you have a losing team, you have employee turnover. Well, those lost reps need replacing, training, and ramp up time…all things that cost money and take attention away from things that could be moving the business in a forward direction. So again, if more than 50% of your reps are missing their numbers, take a deep look in the mirror and find out why. Then, put the ego aside and set proper expectations for the business… A winning team will outperform a losing team 100% of the time and will put less strain on the business as a whole.

 

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