The best way to set sales targets is to build them from the bottom up, from real rep capacity and real pipeline, then reconcile them with the top-down company plan. Targets that start and end with "the board wants 2x" miss, demoralise the team and teach everyone that the number is fiction.
Start with the company number, then test it
Every target begins with a company revenue goal. That is fine. The mistake is to divide it by headcount and call it a quota. Instead, treat the company number as a hypothesis and test it against what your team can realistically produce.
Ask three questions before assigning a single quota:
- How much new revenue did each ramped rep actually close over the last four quarters?
- How much qualified pipeline do we reliably create per month, and from which sources?
- What are our real win rates and sales cycle lengths by segment?
If the answers do not support the company number, you have a planning problem, not a quota problem. Fix it before the year starts.
Related: How to Choose a Sales Analytics Platform in 2026
Build targets from capacity
A bottom-up model is simple enough to live in one spreadsheet:
- List every rep and their expected ramp status for each month of the period.
- Assign a productivity figure to a fully ramped rep, based on your own history rather than industry averages.
- Apply a ramp schedule for new hires, for example partial productivity for the first few months.
- Discount for expected attrition and open roles that will take time to fill.
- Sum it up. That is your capacity number.
Compare capacity with the company goal. If capacity is lower, either hire earlier, improve productivity, or reset the goal. Hoping is not one of the options.
Check pipeline coverage
Capacity only matters if there is pipeline to work. Look at how much qualified pipeline each rep needs at the start of a quarter to hit their number, based on your own historical win rates. If reps routinely start quarters with too little, the target is not the issue; pipeline generation is.
That is often where marketing and sales targets should connect. Give marketing a pipeline target tied directly to the sales number, and measure both on the same definitions.
Related: B2B Sales and Marketing Intelligence: A Practical Guide
Set quota a little above plan, not far above
Most teams set the sum of individual quotas somewhat higher than the company target, because not every rep will hit. The buffer should be modest. When quotas are set wildly above what top performers achieved last year, reps stop believing the number and start managing to their commission plan instead.
A good test: could your best rep hit this quota with the pipeline they are likely to have? If not, no one will.
Make targets fair across territories
Two reps with the same quota can face very different opportunities. Check for:
- Territory size: number of target accounts that fit your ideal customer profile.
- Existing relationships: inherited customers and open opportunities.
- Inbound share: how much pipeline arrives versus has to be created.
- Deal size mix: enterprise versus mid-market versus small business.
Adjust quotas or territories so that effort, not luck, decides who hits.
Ramp new reps properly
New reps need time to learn the product, build pipeline and close their first deals. Give them a written ramp plan with a reduced quota for the first months and clear activity and pipeline milestones along the way. Judge them on leading indicators early and on revenue once they are fully ramped.
Review monthly, change rarely
Targets should be reviewed often and changed rarely. A monthly review keeps everyone honest:
- Compare bookings and pipeline to plan by rep and segment.
- Identify whether a miss comes from pipeline, conversion or deal size.
- Fix the cause: more pipeline, better qualification, or coaching.
- Only reset targets mid-period for real structural changes, such as a territory reassignment.
Moving quotas every time the forecast shifts destroys trust faster than a hard number ever will.
Give reps better pipeline, not just bigger numbers
When a team is short on pipeline, raising targets does nothing. Giving them more qualified opportunities does. One practical source is intent your company already generates: buyers who visit your pricing or product pages without filling in a form. Identifying those visitors and routing the ones that match your ICP to the right rep turns existing traffic into pipeline your team can work.
Link compensation to the right behaviour
Targets and compensation work together. A sensible quota paired with a badly designed commission plan still produces the wrong behaviour. Check your plan against these points:
- Pay on what you want more of. If multi-year contracts or specific products matter, reflect that in the plan rather than in speeches.
- Avoid cliffs. Plans that pay nothing below a high threshold encourage reps to push deals between quarters.
- Reward overachievement. Accelerators above quota keep top performers selling after they hit their number.
- Keep it simple. A rep should be able to calculate their own commission on a deal in a minute.
- Protect retention. Clawbacks on early churn discourage closing customers who were never a good fit.
Review the plan alongside targets each year, and model it against last year's actual deals before rolling it out. That quick test often reveals payouts that would have been far higher or lower than intended.
Finally, communicate targets with the reasoning behind them. When reps can see the capacity model, the pipeline assumptions and the win rates used, they are far more likely to accept a stretch number and to raise problems early instead of at the end of the quarter.
The takeaway
Set targets from capacity and pipeline, reconcile them with the company plan before the year starts, keep quotas ambitious but believable, ramp new reps fairly and review monthly without constantly moving the goalposts. A target your team trusts is worth more than a bigger one they ignore.
