What quota setting is (and why it matters)
Quota setting is the process of assigning revenue targets to reps or teams. Strong quotas align growth goals with capacity, pipeline reality, and comp plans.
Top-down vs bottom-up (use both)
- Top-down: start from company bookings goals and allocate by segment.
- Bottom-up: compute capacity from headcount, quota, attainment, and ramp.
- Reconcile the two and adjust hiring, pipeline targets, or quotas.
Capacity-based quota math
- Effective reps = ramped reps + ramping reps * ramp productivity.
- Capacity = effective reps * quota per rep * expected attainment.
- If capacity < target, fix headcount, attainment, or target.
Pipeline reality check
- Required pipeline ~ target / win rate (add slippage buffer).
- Validate pipeline coverage by segment (ACV and stage differ).
- If coverage is low, quota without pipeline is a plan to miss.
Ramp and seasonality adjustments
- Model ramp by month, not just a single average.
- Apply seasonality factors to avoid front-loading targets.
- Adjust quotas for territory changes and rep tenure.
Quota fairness checks
- Compare quota to historical attainment by segment.
- Use consistent definitions of bookings, ARR, and ACV.
- Set stretch targets but avoid churn-inducing plans.
Scenario stress test
- Model conservative/base/optimistic attainment to see quota sensitivity.
- Recompute pipeline required at each scenario to test feasibility.
- Use the scenario range to set guardrails for hiring or target changes.
Common mistakes
- Setting quota without a capacity model or pipeline coverage.
- Using a single quota across wildly different territories.
- Ignoring ramp time for new hires.
- Changing quota mid-period without clear rationale.