Dear SaaStr: What’s The Best Way to Set Targets for the Sales Team?
First, I try to model 3 overall plans for the year: C-90, C-60, and C-10, not just for the sales team, but the whole company. The C is for “Confidence”. The odds you think you can hit it, from the CEO’s perspective. A bit more on how to do that here.
- The base plan, the plan you use for the overall sales and revenue goals, is the C-60 plan. A plan I as CEO/founder/etc. have a 60% confidence we’ll hit.
- And if we hit the C-10 plan, everyone should get a significant bonus. That’s the stretch goal.
- The C-90 plan (the one you should make almost certainly, unless we really screw up) I only use for financial planning with the CFO. We use that for worst-ish case cash planning. I don’t share that with the team or externally.
- First, figure out the C-60 Plan.
- Then, from that, figure out quotas that are realistic, that at least 60% of the sales team can hit. You don’t want quotas no one can hit. That’s demoralizing and counter-productive. Use your top-performing reps to figure out what a Pretty Good rep can do.
- Pay them market if they hit these quotas.
- Pay them real money if in the end, they hit the C-10 plan. And focus that back on comp for blowing out the quota.
How I do it, at 20,000 feet, at least.