Sales Capacity Plan

For Direct Sales, the expected annual production is forecast using a Sales Capacity Plan. The output is a function of (1) number of quota-carrying sales representatives, i.e. Account Executives (AE); (2) their Quota expressed in Annual Contract Value (ACV) for both subscription and non-recurring revenue such as professional services; and (3) their Productivity, expressed as a percentage of total expected annual production. The Productivity factor is a conservative assumption we use to account for lower than expected Bookings. It takes into account the likely variability in performance among AE’s.

Adjustments are made for Account Executives with shorter tenures and, therefore, are still ramping, i.e. Ramping AE’s. Typical ramp time is nine-months, with a percentage of fully ramped production estimated at each subsequent month. For example, new AE’s may have no production in the first quarter after their start date, begin to generate small volume in their second quarter of employment and this could be 25% of total quota, and ramp to 75% of annual quota in their third quarter. In their fourth quarter of employment, these AE’s will be responsible for their full quota.

Additionally, you should adjust for seasonality if your business experiences it.

The term, Over-Assignment Factor, is sometimes substituted for Productivity. It’s a similar concept with the important exception that the terms are the inverse of one another.

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