Sales capacity planning
Sales capacity planning works out how much selling power an organisation needs to hit a revenue target: how many reps, carrying what quota, producing at what expected attainment, arriving on what dates. The output is a hiring schedule and a quota number, and both are decided before anyone sells anything.
Multiply the reps by the quota and you have a number that has never once been achieved. That is the mistake the whole discipline exists to correct. Assigned quota is what the company asks for; expected production is what it will get, and the ratio between them is the team's historical attainment, which for most organisations sits well below 100% by design. Quotas set so that everyone clears them are not really targets. So the capacity model has three terms rather than two, and the third one is the one companies leave out.
Then the calendar does more damage than the arithmetic. A rep hired in January contributes something close to their ramped-year production; a rep hired in September contributes a rounding error, and both appear identically in a headcount plan. Attrition compounds it, because a team of 24 that loses four reps and hires four reps has replaced experienced production with ramping production and lost capacity while holding headcount flat. A capacity plan that survives contact with the year states hire dates, ramp curves and an assumed attrition rate, and it is read as a recruiting commitment rather than as a budget line. Missing a hiring date in March is a revenue miss in October that nobody will connect back to it.
How many reps the number actually needs
A company needs $18,000,000 of new business next year. Quota is $750,000 a rep, 24 reps are fully ramped on 1 January, and the team has averaged 78% attainment over the last two years. A rep hired in January produces about half a quota in their first year.
- New business target
- $18,000,000
- Ramped reps at 1 January, at $750,000 quota each
- $18,000,000 assigned
- Expected production at 78% attainment
- $14,040,000
- Gap to target
- $3,960,000
- First-year production per January hire, at half quota and 78%
- $292,500
- Hires needed: $3,960,000 divided by $292,500
- 13.5
- Hires required, and what they produce
- 14 reps, $4,095,000
Assigned quota matched the target exactly, which is what makes this the common failure. A company that stopped at the second row would have concluded it needed no hiring at all and finished the year 22% short.
A plan that names a headcount without naming the dates
Fourteen hires is the answer to a different question than the one the model asked, because the model assumed every one of them started in January. Hires that land evenly across the year produce roughly half of what the plan credited them with, so the same fourteen people deliver around $2,000,000 instead of $4,095,000 and the year comes up short while headcount is exactly on plan. Two habits fix it. Put the hire month in the model and ramp each hire from their own start date, and track the recruiting funnel against those dates from January, because a role that takes four months to fill was effectively cut from the plan the day it was approved.
- How do you calculate sales capacity?
- Multiply the number of quota-carrying reps by the quota each one carries, then multiply by the attainment rate the team has historically achieved rather than by 100%. Adjust each rep for the portion of the year they will be productive, using a ramp curve for new hires, and subtract expected attrition. Compare the result to the revenue target; the shortfall, divided by one hire's expected first-year production, is the hiring requirement.
- What is quota coverage?
- Quota coverage is total assigned quota divided by the revenue target. Companies commonly assign more quota than the target so that the team can miss on average and the company can still land its number. A coverage ratio of 1.2 means 20% more quota is carried than revenue is needed, and whether that is enough depends entirely on the attainment rate the team actually achieves.
Nearby terms
The long form lives in the guides: Setting sales quotas.
Knowing the word is
the easy half
Commish pays sales capacity planning the way your plan describes it, shows the arithmetic on every line, and traces each payment back to the deal that earned it.