Set the quota: build the number from capacity, not a wish

1. Before you start

A sales quota is the amount a rep is expected to book in a period. A quota built from capacity starts from a different question than a target handed down from a revenue wish: not “what number does finance want?” but “how much can this team actually sell, given who is on it and how ready they are?” Tiny example: one fully-ramped rep who books $50,000 of new business a month can book $600,000 in a year — so two such reps set a ceiling near $1.2M, before you subtract for anyone still learning the job or anyone who leaves. That ceiling, not the wish, is where an honest quota starts.

Three honest statements before you start:

This is a Decide course. You read a situation, learn the idea, and make a call. You do not write or run any code.
The companies below, Meridian Cloud and Cedarline, are composite — invented SaaS firms built from ordinary figures so the arithmetic is clean. No number is a claim about any real company.
This is not a certification. It proves, to you, that you can defend a quota-setting call.

You need only arithmetic. The hard part is judgment, not maths.

2. The Situation

Meridian Cloud sells a B2B subscription product, and finance has handed the head of sales a top-down new-ARR target of $8,000,000 for next year — “roughly what the headcount should produce.” The head of sales has to decide whether that is a quota she can assign to the team, or a number that guarantees a miss before the year starts.

The catch is that a target that “looks about right” from a headcount can be far above what the team can actually book — because new reps are not productive on day one, and some of the team will leave. Whether $8M is achievable or a set-up-to-fail stretch turns on facts the top-down number never counted: ramp time, expected attrition, and how much cushion sits between capacity and the plan.

3. What you’ll be able to do

After this course you will be able to:

Build a sales quota bottom-up from capacity — ramped, staffed selling months times productivity — instead of accepting a top-down revenue wish.
Adjust raw headcount for ramp time, so a newly hired rep counts for the months they can actually sell, not twelve.
Take an expected-attrition haircut on capacity, and say what the team can realistically book.
Set the coverage cushion between attainable capacity and the committed plan, and name the number that flips a quota from achievable to a certain miss.

4. Prerequisites & time box

Prerequisites: arithmetic. Helpful but not required: the idea of new ARR (the annual subscription value of new business booked). No spreadsheet, no sales-operations background.

Time box: about 18 minutes of reading (measured), plus your own thinking time on the call. That is under the 25-minute cap for a concept course.

Difficulty: 5 / 8 — a manager-level decision: several factors move at once and the naive reading points the wrong way, so you have to reason past it.

5. The case & where the numbers come from

Meridian Cloud is a composite B2B SaaS company: its team size, ramp, productivity, and attrition are ordinary figures a subscription sales org would recognise, chosen for clean arithmetic and not drawn from or claimed about any real firm. The definitions — sales quota, sales capacity, the productivity ramp, attrition, and coverage — are standard and cited in section 11. Every figure below is an in-course assumption; every later number is computed from these.

Item	Figure
Tenured (fully-ramped) reps at year start	10
Planned new hires, all starting in month 1	6
Ramp time for a new rep (months to full productivity)	4 months
Full-productivity bookings per rep	$50,000 new ARR / productive month
Expected annual attrition	20%
Coverage ratio (quota-to-plan cushion)	1.20
Top-down target handed to the team	$8,000,000 new ARR

6. The Concepts

Capacity-based quota

A capacity-based quota starts from selling months times productivity, not from a revenue wish. A fully-ramped Meridian rep books $50,000 of new ARR a month, so across a year a rep who sells all twelve months contributes 12 × $50,000 = $600,000. Meridian starts the year with 10 tenured reps, each able to sell all twelve months: 10 × 12 = 120 productive rep-months, worth 120 × $50,000 = $6,000,000 from the tenured team alone.

The top-down habit is to stop at heads: “10 tenured plus 6 new is 16 reps, 16 × $600,000 = $9.6M, so an $8M target is comfortable.” That is the wish. It counts every head as a full year of a fully-ramped seller — and neither the 6 new hires nor the reps who leave will be that. The next two concepts fix the two things the headcount number over-counts.

(An interactive calculator sits here — enter the headcount, ramp, productivity, attrition, and coverage, and it returns attainable capacity, the plan you can commit, and whether a target is achievable.)

Ramp time

Ramp time is the stretch before a new rep reaches full productivity: they are learning the product, building a pipeline, and closing little. Meridian’s ramp is 4 months, and during it a new rep books close to nothing. So each of the 6 new hires, starting in month 1, sells for 12 − 4 = 8 productive months, not twelve.

New-hire productive months: 6 × 8 = 48 rep-months, worth 48 × $50,000 = $2,400,000. Add the tenured team’s 120 rep-months and the gross capacity before attrition is 120 + 48 = 168 rep-months, or 168 × $50,000 = $8,400,000. Compare that with the headcount wish of $9.6M: ramp alone costs 6 reps × 4 months × $50,000 = $1,200,000 of capacity the top-down number silently assumed away. Ramp is why “we hired the heads” is not the same as “we have the capacity.”

Expected attrition

Attrition is the fraction of the team that leaves over the year. Meridian expects 20% annually. A rep who resigns stops booking, the seat sits empty while a replacement is found, and the replacement then re-ramps — so attrition removes real selling capacity, not just names on an org chart. Modelled simply, expect to lose about 20% of the year’s productive rep-months to departures and the empty-seat-and-re-ramp gap.

Apply the haircut to the gross capacity: attainable capacity = $8,400,000 × (1 − 0.20) = $6,720,000. Equivalently, 168 rep-months × 0.80 = 134.4 effective productive rep-months × $50,000 = $6,720,000. That $6.72M — not the $9.6M headcount wish and not the $8.4M ramp-adjusted figure — is what this team can realistically book. The two adjustments together, ramp and attrition, take almost $2.9M off the naive number.

Coverage and the quota-to-plan cushion

Attainable capacity is an expected value: it is what the team books on average, and individual reps land above or below it. Committing a plan at exactly capacity means a coin-flip on hitting it. The coverage ratio builds a cushion. Two equivalent moves:

Set the committed plan below capacity. Divide attainable capacity by the coverage ratio: $6,720,000 ÷ 1.20 = $5,600,000. That is the number finance can commit to the board with room to miss on some reps and still land it.
Assign more quota than the plan. Total quota handed to reps = plan × coverage = $5,600,000 × 1.20 = $6,720,000 ≈ attainable capacity. Over-assigning like this means the plan survives even when a chunk of reps come in under quota. That gap between assigned quota and committed plan is the cushion.

Now the call. The top-down target was $8,000,000. Attainable capacity is $6,720,000 — the target is $1,280,000 (about 19%) above what the team can book, and it is $2.4M above the plan finance could safely commit. Assigning $8M is not setting a quota; it is scheduling a miss and handing reps a number they cannot reach. The defensible answer is to commit around $5.6M and book toward $6.72M, then close the gap to $8M with levers that add capacity — not with a bigger wish.

What flips the call? Anything that lifts real capacity above the target. If all 6 new hires were already ramped (0 ramp months) and attrition were halved to 10%, gross capacity would be 16 × 12 × $50,000 = $9,600,000, and attainable = $9,600,000 × 0.90 = $8,640,000 — now above $8M, so the same target becomes achievable. Same team, different ramp and attrition, opposite call. The number that flips a quota is always capacity, never the size of the ask.

7. Your Call

You have seen how capacity, ramp, attrition, and coverage decide Meridian’s call. Now a different one lands on your desk.

Cedarline is a composite vertical-SaaS company. It starts the year with 8 tenured reps, and had planned to hire 4 new reps (each with a 3-month ramp). A fully-ramped Cedarline rep books $40,000 of new ARR a productive month, expected attrition is 25%, and the company uses a 1.25 coverage ratio. The board has approved a $3,500,000 plan. Then, mid-planning, a hiring freeze cancels all 4 new hires — and the CFO wants to hold the $3.5M number anyway. Your job is to rebuild the achievable quota under the freeze and tell the board whether $3.5M still stands.

How this differs from the taught case (the transfer): Cedarline is a different company with different figures (8 tenured reps, $40,000 productive-month bookings, 25% attrition, a 1.25 cushion), and it lands a different decision — you are resetting a committed plan against an added constraint, a mid-year hiring freeze that removes the planned reps, rather than judging a single handed-down number on a fully-staffed team. The core concept is the same: build the achievable quota bottom-up from ramped, attrition-adjusted capacity, then cushion the plan below it.

8. Self-check

Before you write the memo, make sure you can say each of these in one line:

Why is “16 heads times $600,000” the wrong way to set the quota?
What two adjustments turn raw headcount into the capacity the team can actually book?
How does the coverage ratio decide whether a target is an achievable plan or a scheduled miss?

If any is fuzzy, reread section 6 — capacity, ramp, attrition, and coverage are the whole course.

9. Stretch

Push the decision further on your own:

Back at Meridian: what is the lowest ramp time at which the $8M target becomes achievable, holding everything else fixed? (Solve for the ramp months where 168-equivalent capacity × 0.80 reaches $8M.)
Meridian could hire the 6 reps in two waves — 3 in month 1 and 3 in month 5. Does attainable capacity change, and by how much, versus all 6 in month 1? (The genuinely harder one: work the productive months of each wave separately.)
Write the one sentence you would say to a finance lead who insists “the target is the target.”

10. Ship it — your decision memo

Write a one-page memo to Meridian’s head of sales. State the call (do not assign the $8,000,000 target; attainable capacity is $6,720,000, and the plan finance can safely commit is about $5,600,000). Show the build in three lines: 168 ramp-adjusted rep-months × $50,000 = $8,400,000; less 20% attrition = $6,720,000; divided by the 1.20 coverage ratio = $5,600,000. Name what you rejected (the “16 heads × $600,000” wish) and why. Name the one thing that would change your mind (real capacity above $8M — shorter ramp, more ramped heads, or lower attrition). Keep it to a single page a head of sales grasps in two minutes. This memo is your own argued claim — not a credential.

11. Sources

Meridian Cloud and Cedarline, and every figure attached to them, are composite — constructed for clean teaching arithmetic, not drawn from or claimed about any real company. The concept definitions used to reason about them are standard; references below.

Concept / claim	Source (publisher)	URL	Accessed
Sales quota — definition and role	Wikipedia — Sales quota	https://en.wikipedia.org/wiki/Sales_quota	2026-07-20
Quota setting and coverage in sales operations	Wikipedia — Sales operations	https://en.wikipedia.org/wiki/Sales_operations	2026-07-20
Capacity as staffed selling months × productivity	Wikipedia — Capacity planning	https://en.wikipedia.org/wiki/Capacity_planning	2026-07-20
Productivity ramp for a new hire	Wikipedia — Learning curve	https://en.wikipedia.org/wiki/Learning_curve	2026-07-20
Attrition as a rate of loss over a period	Wikipedia — Churn rate	https://en.wikipedia.org/wiki/Churn_rate	2026-07-20

Next up

Finished this call? Continue the Sales & Revenue track:

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