All businesses need a sale plan. With no plan, you lose your sales goals, lose momentum, and, finally, loss of income. A Sales Budget can help create a clear marketing plan and simplify the sales administration.
A sales budget is an itemized plan that predicts your total expected sales revenue by considering the number of units you anticipate selling and the price you intend to sell them for. It sets a reference point for how much money you expect to bring in in a given period to guide goal setting and financial forecasting.
Understanding sales budgets helps a sales manager achieve sales objectives more effectively by maximizing profits.
This article covers everything a new sales rep needs to know about the sales budget.
Let’s dive in.
What Is A Sales Budget?
A sales budget is a financial statement that estimates the firm’s revenue over a given period. The company measures the data and uses the data to calculate future performance. Understanding the sales budget helps a company achieve sales objectives more effectively.
Your sales budget determines your business’s expected sales revenue within the specified time frame. Generally speaking, the numbers expected to be sold are multiplied by the sales price. Many factors are essential to planning and creating a sales budget.
This will help you estimate the expected sales volume during the budgetary period.
Your sales budget should provide insight into your sales forecast. Check out the guide, related to gross sales vs net sales.
Why Is The Sales Budget So Important?
The sales budget is helpful to businesses when it comes to forecasting performance or estimating revenue from specific items.
It is used to provide a sales forecast and increase efficiency. The sales budget is also a helpful planning tool for companies that want specific standards for accomplishment. For example, a company could multiply its annual revenue budget by four to determine a quarterly target of 250.
Organizations can assess whether their business will succeed by determining whether their business targets have been reached.
The sales manager uses these sales data to make effective corrective decisions.
A sales budget sets a goal for the sales period by exploiting resources and maximizing a business’s profits. It also serves as a planning tool, which also helps specific departments know what to expect in the budgeted timeframe to use their resources effectively. By providing nearly accurate sales data, the sales budget gives sales reps goals to pursue.
In general, achieving a sales surplus is a favorable result that will lead to a win. However, you must have an adequate sales budget instead of focusing on attaining low-cost profits and market trends.
Other teams, such as the marketing department, could pull sales data from the sales budget to identify how previous sales efforts were used to arrive at the current sales figures. This knowledge could help them optimize and tweak their sales activities. Find the guide for how to do sales prospecting.
Sales Budget Vs. Sales Forecast?
The sales budget and sales forecast have many similarities. So much so that they can often be confused. First, however, it is essential to understand that they differ.
Your company’s sales budgets represent quantified estimates for sales numbers expected over the budgeting period. Summary of the estimated revenue for each service or product sold. Usually, sales budgets are created.
In alternative cases, sales forecasts are created after budgets have already been set and show how much they will sell in specific periods. Check out the guide, related to inside sales vs outside sales.
Components Of A Sales Budget
Most collaboration plans take place using a spreadsheet rather than in several spreadsheets. Sales budgets are no different.
Using a simple spreadsheet might ignore a few crucial factors in your business, and one too complicated can make you quickly forget all about running a business (LOL). Therefore, before beginning to work on sales forecasting and budget preparation, the component must be correctly prepared.
Your sales budget spreadsheet might be more accurate than others, and every sales budget must include three elements. Once these three documents are prepared, you can prepare the sales budget.
Whatever spreadsheet is used, your sales budget must preferably contain these components. Each of these three elements can help drive and maintain your marketing budget;
Price per unit
Usually, a sales budget includes the price of a company’s products or services as of the most recent date. Each item is discussed individually. They also have price fluctuations here if they anticipate that there will be variations throughout the budgeting period.
Total revenue
The last content of the sales budget is the total revenue. You can calculate this by multiplying the sales forecast by the price per unit. The total revenue is the company’s sales budget.
Sales forecast
The sales forecast is created by looking at past data and past market trends. It indicates how many units the company expects to sell during the budget period. Sales forecasts may look at what individuals, teams, or the entire company will sell, depending on the source.
To better understand the sales forecast, think of it as a tool to forecast sales.
How To Prepare A Sales Budget
The sales budget process includes seven steps, but before we describe them one after the other, let’s talk a bit about spreadsheets, which are crucial in creating sales budgets.
Like large corporations, small businesses will have many spreadsheets used and created collaboratively. Ultimately, planning spreadsheets will all tie into the three fundamental financial statements a company uses to analyze and plan its business operations:
Income statement
An income statement shows your company’s profit and losses over a given period of time.
Balance sheet
A balance sheet lists your company’s assets, liabilities, and shareholder equity (if applicable).
Cash flow statement
A cash flow statement lets you know how much money is coming in and going out of your business.
The above terms will help you get the basics of your operating budget.
It is now time to focus on the seven steps to prepare a sales budget.
1. Select the budget period
The first step should be the time frame you want to spend on the project and keep that in mind. These intervals are usually monthly, quarterly, or annually.
Often some shorter budget periods like sales budgeting on a day-to-day basis or weekly will either be unproductive or inaccurate. It varies depending on where you’re going and how many sales reps you have on your sales team. Ideally, your product should have a monthly budget to cover all the seasons.
2. Take a look at Historical Sales Data
Gather any previously available sales figures you might have that match your current sales timeline. It is a straightforward way for your sales budget to determine the current market trends which could be used in your total sales plan.
3. Talk to your customers
Getting in direct contact with your customers helps you understand the needs and wants of your market and the future plans they may have to purchase from your company. This will help create a strong relationship with your customers, leading to repeat business, and will ultimately lead to a more accurate sales budget, potentially increase sales prospect numbers, and reduce cash spent on customer acquisition.
Talking to your customers can also help your sales department with increased demand to sell the units expected and reach even more sales goals.
4. Gather products and sales prices
Keep an inventory of your current products and their unit selling price, units sold, previous sales patterns, and past sales data. When thinking about selling new products, be sure to note the details and upcoming changes in pricing for your existing products.
5. Consider the size of your sales team
Sales representatives ultimately drive sales, so be sure your team size matches your sales budget. Tailor your requirements according to the number of people on your sales team.
If there’s a conflict, that is an indicator that it’s time to hire more sales reps to achieve your monthly sales budget.
6. Look at Industry Benchmarks
This is an efficient planning tool. There’s no harm in taking cues from the companies existing in your industry. This is especially helpful when you are new to the industry and don’t have your personal sales records to refer to while building your annual budget.
You can find accurate, real-time financial data for public companies in your industry on the U.S. Bureau of Labor Statistics website.
7. Create the sales budget
After gathering all the necessary requirements and tools from the central sales department, it is now time to delegate your most critical sales rep to create the actual sales budget. Explore some sales-related guides, sales productivity, sales analysis, B2B sales process, and sales qualified lead.
Bonus tip: Never stop tweaking your sales budget
Sales Budget Templates
You can use these to begin your sales budget preparation process. It is important that you choose only one sales budget template per time, this would be depending on the budget period you have chosen.
Conclusion
The process of preparing a sales budget in a structured and accurate manner isn’t very difficult for sales teams. By following the steps outlined above and utilizing any of the provided templates to get an idea of the structure, you should be able to get a clear range of what you need to do. Your sales team and company as a whole can remain profitable and grow by creating a realistic sales budget.
You can achieve even more when you use Sloovi outreach. This tool helps you reach more leads and potentially improve your sales budget. Start now!
Frequently Asked Questions About Sales Budgets
What is a sales budget and how is it prepared?
The sales budget is one of the types of operating budget that is a projection for the anticipated units a firm wants to buy in a given period. These figures are based on an earnings report for the company.
Why is a sales budget important?
It allows managers the ability to estimate the resources required to achieve desired results and costs. When a sales budget has dropped, management teams must figure out how to use the resources provided.
What is the type of sales budget?
The accuracy of sales estimates determines the practical feasibility of operating budgets. A sales plan provides the foundation for many of our other budgets. Sales budgets determine sales possibilities by quantity. Also, check out the related guides, B2B sales, SaaS sales and tech sales.