What the Monthly Sales Quota (Rule of 78)?

 If you know the quota that a salesperson must bring annually (e.g. 780k) and you want to know the set amount of NEW revenue the Sales Person must bring in every month, then learn about the "Rule of 78" with this blueprint.

Does it seem like every salesperson you know has shifted into high gear once the new year starts? If so, it is likely because they understand the infamous Rule of 78. Simply put, the Rule of 78 is a way to quickly estimate a full year’s worth of revenue for businesses that deal with monthly recurring fees. By applying this rule you can quickly understand the NEW sales turnover a particular salesperson must with a set target for the entire year. To use the rule, you simply divide the total revenue that will come in during a 12 month period by 78 to get the amount of new revenue the salesperson has to bring in every month.

At first, you may think that the magic number for figuring a year’s worth of revenue is 12. However, for subscription-based products or other monthly-recurring revenue scenarios, keep in mind that every new dollar brought in will be with you for the rest of the year. So, a new sale of $ 10 in January will be worth $ 10 x 12 = $ 120 for the whole year. However, in February you will bring in another new sale that will be worth $ 10 x 11 = $ 110. In March, your new sale will be worth $ 10 x 10 = $ 100. If you work out the math, the result is that there are 78 months worth of revenue in a year assuming that you bring in the same amount each month.

Typically, the Rule of 78 is used with sales quotas. If a salesperson must bring a total amount of recurring revenues you can simply divide the quota by 78 to get the  set amount of new recurring revenue each month.  For example, if the total annual quota of recurring revenue is $780k, the sales quota of NEW MRR will be 780k / 78 = 10k.

Once you understand the Rule of 78, you understand why salespeople are so busy at the beginning of the year. Sales made in January will have 12 months of billing for the year; whereas sales made in July will only have 6 months of billing in the current year. In other words, sales made in January are worth 2x more than sales made in July. Companies know this and will often run incentive programs early in the year to drive more sales sooner to increase the annual sales turnover.

 

 

Beginner

Progress

Not started

Mobile App Download

With a Marketing Budget, the business creates App Downloads generating App Download Fees. A share of App Downloads converts into Activated Players generating ARPU for a specific lifetime. By cross-selling addons, a share of Activated Players become Engaged Players generating additional ARPU. 

6 Lessons

Advanced

Progress

Not started

SaaS Training

This is a great Training Blueprint for a SaaS Business of how to connect revenue streams and understand and analyze the unit economics in Lean-Case

6 Lessons

Advanced

Progress

Not started

When to hire Sales and Cust. Success Reps ...

You know the quota for Sales Reps and Customer Success Reps, but want to know how man and when to hire them? Then this Blueprint is made for you

2 Lessons

Beginner

Progress

Not started

Lean-Case Tutorial - The eCommerce Template

This tutorial shows how to create a Lean-Case eCommerce model with a Get-Customer-Phase modelling the Lead-Generation Process of creating leads and converting them into customers and a Keep-and-Grow-Customer-Phase modelling the Buying Process of driving first time buyers to become loyal buyers.

2 Lessons

Pro

Progress

Not started

The SaaS B2B Template

This tutorial shows how to create a Lean-Case SaaS B2B model with a Get-Customer-Phase modelling the Sales Process of converting prospects into customers and a Keep-and-Grow-Customer-Phase modelling the Account Management Process. You learn how to set up all revenue streams across those two phases, connect the streams with conversion rules and validating the mechanics of your model. We are also showing you how to add all elements to calculate your unit economices - churn, cost of goods sold and cost of selling.  Finally, we provide an example how to add organizational units to your model with jobs, groups, team roles and manager roles. Headcounts can be automatically calculated driven by the number of sales teams, customer quotas or revenues. After learning these basics, you can get started to adjust your model. 

3 Lessons

Pro

Progress

Not started

Getting Started - Your first Lean-Case in 20 min

Learn how to build a professional Business-Case with Lean-Case in 20 min.  Discover how you can answer 5 key business questions:

- What is your business model?
- How can you forecast your potential future revenues?
- Is your business viable?
- When does it become profitabel?
- How to track your business performance?

Also learn, how to to keep Lean-Case working for you by finetuning your assumptions like using a spreadsheet and sharing your Lean-Case with peers or investors.

5 Lessons

Pro

Progress

Not started
Pen
>