How to set sales targets for your team

Split the new-customer revenue by product line and by territory according to where the opportunity actually is — the segment analysis, the market’s size, last year’s results — not evenly. A territory with a new competitor gets less; a product with a waiting list gets more. Then, for each salesperson, translate their share into activity using your own rates: if a customer takes four proposals to win and a proposal takes three qualified opportunities, a target of ten new customers is forty proposals and a hundred and twenty qualified opportunities in the year — ten a month, two or three a week. That weekly activity number is the target the salesperson can act on every Monday; the revenue number is the consequence.

Write both down together. A salesperson who knows they need three qualified opportunities a week has a plan; one who knows they need eighty lakh has a worry.

Capacity: a salesperson who spends half their week on delivery and collections can produce half the activity of one who sells full time; set the target on selling hours, or free the hours. Ramp time: a new salesperson produces little in the first quarter and reaches full rate in the second or third, depending on the cycle — set a ramped target, quarter by quarter, rather than a full-year number from day one. Seasonality: last year’s monthly pattern tells you which months carry the year; a flat monthly target in a seasonal business is missed for six months and beaten for six, and both are meaningless. Pipeline reality: the first quarter’s target should be reachable from the pipeline that exists in January, because nothing prospected in January closes in January.

A target that fails any of these four checks will be missed for reasons that have nothing to do with effort, and the team will learn that targets are arbitrary.

Fairness is about the base, not the number: two salespeople with different territories, tenures and products should have different targets, derived the same way, and everyone should be able to see how. The activity target is the same method for all; the revenue target reflects their situation. Incentives attach to both — a share for the activity that is within their control, the larger share for the revenue that results — so that a quarter of bad luck does not zero someone’s earnings and a quarter of good luck does not reward nothing.

Adjustment rules, written in advance: targets are reviewed quarterly against the pipeline and the market; they change when something structural changes — a territory added, a product withdrawn, a major customer lost for reasons outside sales — and they do not change because a month was slow. The rule protects the team from arbitrary cuts and the owner from monthly renegotiation.

The mistakes: last year plus a percentage; the same target for everyone; a full target for a new hire from month one; flat monthly targets in a seasonal trade; revenue targets with no activity targets beneath them; and changing targets mid-quarter, in either direction. A safeguard: before announcing a target, work out the weekly activity it implies and ask whether a competent person in that role could do it in the selling hours they have.

Measure targets by whether they are met — around two-thirds of the team hitting a well-set target is healthy; everyone hitting it means it was low, nobody means it was a wish — and by whether the activity numbers track the revenue as the model predicted. Good targets make Monday mornings specific and month ends unsurprising. This is the sales-planning work we do — the revenue split, the activity model from your rates, the capacity and ramp checks, the fairness review, and the written adjustment rules — and the free audit starts with last year’s targets and what happened to them.