The sales budget affects sales processes to the number of new salespeople to onboarding and everything in between. The sales budget is an essential component to keeping the company profitable and seizing opportunities in the future.
At the end of this blog, you can create a sales budget. Of course, you can also use the knowledge of Customer Factory to mirror your budget. Our specialists are ready for a no-obligation consultation.
The sales budget (and the process for creating it) is a guide and helps steer the company and its sales team through the rest of the month, quarter and year. The more accurate the sales budget, the more effectively the business can be run.
Creating a sales budget
Let’s start with an open door: one of the most important things to keep in mind when creating your budget is that it be realistic. You must consider both internal and external factors that affect sales figures throughout the budget period. Here are the steps you need to take to create an executable, accurate and most importantly, realistic sales budget to keep your sales team profitable.
1. Select a period for the budget
The first thing you do is select the time period you want to use for your budget. Sales budgets are usually structured as a quarterly budget with an annual total, but they can also be set up as just an overall annual budget. Many managers fall into the trap of wanting to present an overly detailed plan. Customers rarely allow themselves to be coerced.
2. Assess your sales prices
Keep the current selling price of each unit or service handy. If you have multiple products or services, you need the current selling price for each product. If sales prices change later in the year (due to increased demand, expected increases in material costs, etc.), be sure to have those new prices on hand as well. Think carefully about your pricing policy and explain why you charge a certain price and whether it is the optimal price in the market you operate in.
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3. Retrieve historical sales data
While you’re thinking strategically, look at past results. If your business has been around for a while, this is your main starting point when creating a sales budget. Look at which customers have dropped out, increased or decreased in sales and ask yourself what causes that.
4. Review industry benchmarks
I see it happen too infrequently: looking at the neighbors. Yet that is a valuable and profitable activity. What does the market look like next to your company, how do colleagues do it, and what do your (potential) customers think about it? Benchmarks and sales data for listed clients and competitors are available online. You can also get industry-wide statistics and other important financial data from the Central Bureau of Statistics. Whether you’re a startup or an experienced entrepreneur, using recent benchmarks helps create a more accurate sales budget.
5. What are the market trends
Last year’s sales figures lay a good foundation for starting your sales budget. It is also true that past performance does not always predict future results. Therefore, current market trends should also be a factor in setting your budget.
Whether the market is growing or shrinking, you must factor it into your sales budget. Another example of a market trend to consider is the increased saturation of competitors this year compared to last year, which may lead to a slight drop in sales, even temporarily.
6. Assess your sales team
Look at how many vendors you have available. Compare this number to previous sales periods. Also consider attrition: a new salesperson takes quite a while to become successful. Some salespeople have reached the top of their sales and need to optimize for results. When creating a sales budget, adjust your plan accordingly.
7. What internal factors are important?
All changes made to the business model affect the sales budget figures. See what plans the company has and how you can facilitate them in your sales plan. Changes can include things like expanding your range of products or services, expanding into new markets, discontinuing products or recent price changes. For example, if last year 35% of sales came from a product or service you no longer offer, this should be factored into your new sales budget.
8. Listen to your salespeople and customers
Salespeople are the ones who deal with customers every day in today’s market. Get an idea of the number of sales they expect and what their individual pipelines look like based on their efforts. Vendors’ input is of great value in creating an accurate sales budget.
Customers themselves are also a great resource when it comes to creating a sales budget. Especially regular customers. What they are willing to spend on your products or services in the coming year compared to last year is a clear indicator of future sales. What do customers expect from your company?
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9. Evaluate the sales funnel
Look at the percentage of prospects in your sales funnel that converted into customers. For example, let’s say 30% of prospects closed successfully last year, then you can estimate that 30% of the prospects in your team’s sales funnel will convert into customers this year.
10. Make the budget
Meanwhile, we can compile the data and information collected into an estimated number of units expected to be sold in the coming year. Now you can make the actual sales budget. Simply put, if you have the totals for the expected number of units sold, multiply that by the current sales price to get your estimated sales totals. You do this for products, services and hours.
Tip: Track the budget closely
After creating the sales budget, it is equally important to continue to monitor it regularly and revise it as needed. Compare the budget with the outcome and analyze the results. The sales budget is not set in stone and can be fluid. If sales start going much higher (or lower) than expected, you may want to revise the numbers during the budget period. Especially if you sell products. You don’t want to find yourself in a situation where you can’t meet demand or instead have a large surplus of products. You also want to be able to realistically allocate revenue to production, marketing, etc. and proactively have an idea of where adjustments to the sales process may need to be made to remain effective.
After the expected sales period of your budget ends, compare the total number of estimated sales to what was actually sold. Any discrepancies can be used to help you create more accurate future budgets.