Top Ten Sales Quota Calculation Methods Most Technology Firms Will Use in 2006 and They Are All Wrong

Calculating accurate software, IT and professional service sales quotas is an important business variable for IT firms to succeed. Today, most calculate them incorrectly. By implementing an IT sales quota based on market research, market gap size, and definable business sales metrics instead of guessing, management teams can manage their firm more profitably, satisfy their investor and funding sources, and capture sales at a lower cost.

(PRWEB) October 12, 2005 -- Calculating accurate software, IT and professional service sales quotas is an important business variable for IT firms to succeed. Today, most calculate them incorrectly. By implementing an IT sales quota based on market research, market gap size, and definable business sales metrics instead of guessing, management teams can manage their firm more profitably, satisfy their investor and funding sources, and capture sales at a lower cost.

“When sales quotas are incorrectly calculated based on guesswork or industry estimates, IT firms miss their revenue forecasts and companies fail” said Paul DiModica, President of DigitalHatch (www.digitalhatch.com) and publisher of BDM News (www.bdmnews.com).

The top ten IT sales quota calculation methods currently used by most high tech firms include:

1.Calculations based on last year's territory sales numbers;

2.Calculations based on the cost of a salesperson times a multiplier (sales costs x 3);

3.Calculations based on the cost of corporate General Administrative (G&A) plus a gross margin;

4.Calculations based on the revenue goals committed to Wall Street or VC's;

5.Calculations based on the sales department's goal divided by the number of salespeople;

6.Calculations based on the salesperson's success the previous year;

7.Calculations based on an imaginary compensation number that was sold to the salesperson as their income potential if he/she hit 100% quota;

8.Calculations based on what the IT trade press says is the annual growth rate for technology for this year (national growth up 12%, sales quotas are up 12%);

9.Calculations based on what the VP of Sales' experiences were at other companies; and/or

10.Calculations based on a percentage of what the top salesperson did in their territory.

The above ten techniques represent the vast of majority of sales calculation methods used today in the high tech industry. These impractical and unscientific quota determination methods are used over and over in technology firms both public and private. More times than not, the sales quota number is created based on commitments to investors, bankers, or Wall Street, combined with the perception of accounting regarding what the cost of sales should be.

None of these methods are accurate.

These quotas are based on outside influences and expenses not related to the sales potential of an assigned territory. When these quota determination models are used, more times than not, they just frustrate everybody.

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