Sales Target Letter Format
Sets an individual target for the period, with the basis it is measured on.
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Dear Sir / Madam,
Your sales target for the period [date] to [date] is $ [amount] of net invoiced value, excluding tax and delivery.
Incentive on achievement: [rate and basis]. Achievement is measured on invoices raised within the period and settled within their credit terms. Cancelled orders and credit notes are deducted in the period they arise.
The target and the basis above will not be changed part-way through the period. If anything outside your control makes it unreachable, raise it early and we will look at it together rather than at the end.
What is a Sales Target Letter?
A sales target letter gives one person their number for the period, the basis it is measured on, and what depends on hitting it. It matters at the end of the period, not the beginning. Targets that live only in a manager's spreadsheet get disputed at payout, when the definition of a booked sale suddenly turns out to have been ambiguous all along. A signed letter closes that argument before it starts.
Sales managers issue them at the start of a quarter or financial year. Distributors and manufacturers issue them to channel partners and dealers, where the target drives a rebate rather than a salary. Area and regional managers issue them in retail, telecom, insurance, pharmaceutical and financial services field teams. The recipient uses the letter to work out what to prioritise, what a good month looks like, and what their variable pay will be if things go to plan — which means every ambiguity in it becomes a question in month three.
Where the target feeds variable pay, it interacts with employment and wage law, and the position differs. Whether commission is a contractual entitlement, whether it continues to accrue after notice is given, and how it is treated on termination are governed by the employment contract and by local rules: state wage payment laws in the United States, holiday pay case law in the UK, the terms of appointment together with applicable wage legislation in India, and award or enterprise agreement terms in Australia. A mid-period reduction in earning potential may also amount to a contract variation. Take specific questions to an employment adviser.
The letter is not a contract of employment and it is not a commission plan. It states the target; the rules on how commission is calculated, when it is earned and when it is paid belong in the plan document, and the letter should point at that rather than paraphrase it. It does not authorise a deduction from wages or a clawback of paid commission — those need their own contractual basis. It is not a warning or a performance improvement plan, and it should not be written as one.
What to put in a Sales Target Letter
These are the details this template asks for. Anything left blank is marked in red on the preview so you can see what is still missing.
| Field | What goes in it |
|---|---|
| Issuing organisation | For example: Maple Grove Homeowners Association |
| Organisation address | For example: 1420 Kinnear Road, Columbus, OH 43212 |
| Designation | For example: Senior Assistant |
| Period from | Free text |
| Period to | Free text |
| Quota for the period | For example: 90,00,000 |
| Commission rate | For example: 4% of net invoiced value, excluding tax and delivery |
| Signatory name optional | For example: K. Srinivasa Rao |
| Signatory designation optional | For example: Honorary Secretary |
| Issued to (full name) | For example: James Whitfield |
| Their address | For example: 588 Kinnear Road, Columbus, OH 43212 |
How to write a Sales Target Letter
State the period and the number
Give the exact period with start and end dates, the target figure with its currency, and the unit — revenue, gross margin, units, new logos, collected cash. Where the target is broken into months or quarters, show the split, and say whether missing one month can be recovered in the next or whether each period stands alone. Ambiguity here is the single most common cause of a disputed payout.
Define the measure precisely
Say what counts. Is an order credited when it is booked, when it is invoiced, or when the customer pays? Is the figure net of discounts, returns, credit notes and taxes? Are renewals included at full value or a reduced weighting? Write the definitions out even where they feel obvious, because the person reading this letter and the person running the commission report may be applying different assumptions.
Set out territory, splits and house accounts
Name the territory, the account list or the segment. State how a deal involving two people is split, and who decides. Identify house accounts, inherited accounts and any exclusions that do not count towards the target. This is the section people skip, and it is the source of most of the arguments, because two representatives claiming the same order is a problem with no good solution after the fact.
Link it to pay without restating the plan
Explain how achievement translates into variable pay in outline — the on-target amount, the threshold below which nothing is payable, any accelerator above target — and refer to the commission plan document for the detailed rules, naming it and saying where to find it. Keeping the mechanics in one place prevents the letter and the plan from drifting apart and contradicting each other next year.
Say who reviews it and when
Name the review points, the manager responsible, and the circumstances in which a target might be adjusted — a territory change, a long absence, a product withdrawal. Say how any change would be communicated and agreed. A target that can be revised without a stated process feels arbitrary, and one that cannot be revised at all becomes meaningless the moment something material changes.
Common mistakes
- Setting the target in revenue while paying commission on margin, so the seller optimises for a number that does not match the one they are paid on.
- Failing to say whether a cancelled or unpaid order is clawed back, which leads to commission paid on revenue the business never collects.
- Issuing the letter weeks into the period, so the first month is worked without a target and then counted against one.
- Leaving no rule for shared or team deals, so two people claim the same order and the manager has to choose between them after both have banked it.
- Changing the number mid-period without a written variation, which damages trust immediately and may raise questions about the contractual basis for the change.
Frequently asked questions
How do I write a sales target letter to an employee?
State the period and the exact figure, define precisely what counts towards it, set out the territory and how shared deals are split, outline how achievement links to variable pay while referring to the commission plan for the detail, and name the review points. Issue it before the period starts and ask the employee to sign and return a copy.
Can a company change my sales target mid-year?
That depends on your contract, on the commission plan, and on the employment law where you work. Some plans expressly reserve a right to adjust targets on a territory or product change; others do not, and a unilateral change reducing earning potential may amount to a variation of contract. Read your own documents first and take the question to an employment adviser if the amount at stake justifies it.
What is the difference between a target letter and a commission plan?
The target letter is personal and time-bound: this individual, this period, this number, this territory. The commission plan is the standing set of rules on how commission is calculated, when it is earned, when it is paid and what happens on termination. Keep the mechanics in the plan and the numbers in the letter, and have the letter refer to the plan by name.
Should the employee sign the sales target letter?
Asking for a signature is common and useful, because it evidences that the target and the definitions were communicated at the start rather than reconstructed later. Signature usually acknowledges receipt rather than creating a new contractual obligation, but that depends on the wording and the governing law, so have the standard form of words reviewed before you adopt it.
What happens if I miss my sales target?
The immediate consequence is normally on variable pay, calculated under the commission plan rather than the letter. Whether missing a target can lead to a performance process or affect employment depends on the contract and on local employment law, which sets out what a fair process looks like. If you are concerned about your own position, get advice from a qualified employment adviser.
This page explains general practice and is not legal advice. Requirements differ between countries and, in some cases, between states — check what applies where the document will be used.