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Only 25% of Sellers Hitting Quota...
What are the reasons behind this and is it a good or bad thing?
I responded to a post on Reddit recently asking what is a common percentage of sellers to make quota. The OP mentioned that only 25% of the sellers in their company are making quota.
This is my more in-depth response to that question.
The short answer, 75% should be within 80% of their number.
If only 25% are hitting, how close are the other 75%? If the other 75% is at 80-90% of their number, then just a few minor tweaks need to be made to get that number to close to 100%. You’re also at a great company. Don’t leave.
If 75% are below 75% attainment, your company has likely over hired in sales and needs to figure out go to market.
Companies over hire for a number of reasons, but a big one is a ‘growth at all costs’ dictated by boards. It makes for kind of a shit sales culture, but it works.
Here’s how: Let’s say that the average seller in your company can only produce $700k per year (for whatever reason). If the company has a $70MM goal, then it makes sense to hire 100-people and give them $1MM quotas, even if the exec staff knows full well, they will only get to $700K. You’ll have a handful of people that do $1.5MM. You’ll have 10-15 people shit the bed and deliver $300k - $500K. The rest will deliver about $700K and you’ll get close to your $70MM target.
At DySi, Russ Fradin and I had a thought exercise asking the question “How many people would we need to hire in order to 100% guarantee that we hit our number?”
It is an interesting exercise. Let’s say that the number was $10MM, with an average deal size of $100K. For the year, we’d have to close 100-deals. Putting marketing aside, if money were no object, could you hire 100-sellers to do 1-deal each? Would that guarantee you’d hit your 100-deals at $100K?
What about 1,000 sellers? Maybe you give each seller a quota of 1-deal and a territory of 10-companies. You’d only have 10% of the team make the number, but as an executive, you’d make it.
Now work backwards to get to the guaranteed number for you. What you’ll likely find is that you were too aggressive on performance of sellers or the success of the market when you did your modeling in the prior year. If you’ve got a good FP&A person that you partner with, you’re likely not off by much. Probably less than 10% of your headcount.
If you’ve got a good war chest, and are in growth mode with a $10MM+ number, adding an extra 10% buffer on your sales team, probably isn’t the worst way to spend a few $100K.
Yes, you’ve got the added marketing & management costs, but it is likely less than $1MM all in. For a $10MM team, figure $300K in salary for 2-sellers, maybe $200K in commissions, another $200K for some SDR’s to support them and maybe $50K - $100K in marketing & management dollars. It’s probably worth that extra $1MM from your $50MM raise to guarantee you hit the number.
Your board won’t care about the money after the next meeting, it will look great when you hit the number, and it will help you raise more money at a higher valuation in the future.
For sellers, it is shitty when you only have 25% of the team hitting quota. I don’t want to take that away, but there is always a bigger story behind why that is happening.
But, as a leader, revenue distribution is a real thing and it is important to manage to it.