Quota is not a dirty word

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“We are ALL in sales” – Dale Carnegie

I used to think that quota was a dirty word. It struck me as restricting freedom and potentially forced the exploitation of trusted customers and prospects to drive the bottom line results. But I was wrong. In reality, a quota is a number that is useful to incent certain behaviours. The trick is to incent the appropriate behaviours. It is a contract between a sales person and an organization about how to compensate behaviours based on outcomes.

“Quota is a direct path to clarity and accountability.” – Shawn Yeager

So many entrepreneurs can benefit from contracts with defined outcomes. I was chatting with a startup last week about the numbers he agreed to with his VC to unlock the next tranche of funding. He mentioned that he wasn’t going to meet the numbers, but he still expected the VC to unlock the funding. My advice to him was very straight forward, it was to figure out how to achieve the agreed to numbers, or immediately open a conversation with the VC about missing the numbers due to changing market conditions and see if the tranche can be renegotiated. In the case of this entrepreneur, the numbers were in the funding contract, and I fully expected the VC to hold the entrepreneur to deliver on these numbers. The numbers and metrics exist to help assess the risk and the ability of an entrepreneur to deliver.

The secret with an early stage company is to set appropriate metrics, quotas and growth numbers that incent the correct behaviours out of entrepreneurs. The good news is that there are a lot of examples of SaaS, B2B and consumer metrics that can be used.

There are a lot of different sources of metrics and numbers. Each of the numbers needs to be considered in corporate revenue goals, past historical performance, current product development stage, market share, budget, etc. The targets and growth numbers need to be established.

I’ve taken to requiring all of the startups I mentor, to establish 3 metrics that we discuss in our mentorship meetings. Each of the metrics must be clear enough for me to understand, for example:

  • Number of paying customers
  • Number of registered users
  • Churn rate
  • Number of pageviews or unique visitors

And each metric should have the current measurement, the predicted growth rate and the actual target number. I try to start each conversation around the metrics. And any issues related to the market conditions, learnings, corrections, etc. Then together we set the targets as part of the planning for the next meeting. This may include a redefinition of the metrics. The trick for me as a mentor is to try to help identify what metrics I think are most useful for the startup and founder to focus on next.

What are the metrics other entrepreneurs track? How do you set your targets and quotas?

What are the metrics and growth rates that investors like ExtremeVP, Real Ventures, iNovia Capital, GrowthWorks, Rho and others want to see from prospective early-stage companies?

Big Hairy Audacious Goals for Startups

Reid Hoffman talks about LinkedIn’s startup story on CNN. It’s a very interesting story about a successful entrepreneur becomes a serial entrepreneur by focusing on both a vision and a set of success metrics.

We had this initial challenge of, "How do you get a million people?" The first challenge was getting enough people so that functions like searching for people or sharing information had enough people in it to be valuable. The year 2003 was all about tuning and viral growth.

I’m a huge believer in getting a million people, getting them engaged, and then building a business model on top of that.

Why does a million people matter? Is this a good metric for other startups? How will know if you are successful? This requires having both a set of measures and a set of goals.

AARRR! Be Bold. Be Humble.

What should you be measuring? The good news is that others have done a lot of the heavy lifting. Dave McClure has a great presentation on Startup Metrics for Pirates. The

Dave has a quick 5 point plan for understanding how to frame a startup, the business model and the performance of both the marketing and product development efforts.

  • Passion for problem/solution + Hypothesis of Customer Lifecycle
  • 1 page Business Model: Prioritized List of (Users + Conversions + Priorities)
  • Critical, Few, Actionable Metrics + Dashboard of Measured User Behaviour
  • 1 page Marketing Plan: (Channels + Campaigns) * (Volume, Cost, Conversion %)
  • Velocity of (Product Execution + Cycle Time of Testing) * Iteration

This shouldn’t feel like rock science. It’s a way to frame the problems that all startups should be used to answering. What problem do you solve? What is life cycle of your customers? Who are your customers and how are you acquiring them? How do you reach your customers? How do you know if your development process is healthy? How will you know if you’ve been successful? It’s not rocket science.


Startup Metrics provide the baseline set of things a startup should be measuring. You should be building the data collection into your application, and he suggests you should “delegate each metric to someone to own”. This is the what, but it’s missing the Big Hairy Audacious Goal. The metrics are the starting point for measurement, and not they are not the target for an organization. 

What is your “million users” goal?