In short, a sales budget is a projection of how much money you expect to make from the sale of products or services.
It can be done monthly, quarterly or annually, and it can also be updated as you get new and relevant information about your business.
When doing so, you must take into account certain factors, including market trends, the behavior of your customers, previous sales data or the size of the industry in which you are immersed.
These estimates are essential in the design of any sales and marketing strategy, as they help companies plan ahead and stay on top of their revenue goals.
What to consider when creating your sales budget
Before sitting down to create a sales budget, you need to know some relevant aspects, such as the ones that we will share with you below:
- The process must be efficient and replicable.
- You must choose the work tools that best suit your team, the technology you have available and the size of your company.
Many companies prefer to invest in specialized software if they have built large audiences, while others are only able to design simpler processes that can be carried out by their own team.
In any case, a well-landed sales budget will always have the same components. (Although it should be noted that the level of precision or detail of certain data could vary).
How to create a sales budget
Creating a sales budget is a must if you are focused on driving growth, or scaling your business.
This planning allows you to be aware of your income and expenses, to, among other things, make the best decisions when managing your company’s resources.
would you like to boost effective strategies to increase the conversions of your business? If so, we invite you to know the step by step to create your budget successfully:
1. Review the basic data
Before you start forecasting your sales levels for the future, you should assess your company’s performance over the past few years.
Likewise, you should know what the current situation of the company is and what are the external factors that could influence your market niche.
That way you will have the basic information of your business in mind and you will not be improvising when doing your accounts.
2. Take inventory
It is important that you know the number of products you have available in stock. Also, you should review their prices to see if they are still competitive or profitable within your niche or market segment.
During this phase you can also check the quality of your products; remember that over time they could deteriorate.
And in case you sell services, during this step your job will be to group them and define their benefits.
3. Analyze your competitors
something crucial in business world is to know what your competition is doing. However, this analysis should always be aligned with the practice of the benchmarking.
Basically, it is a comparison process to have a reference in relation to the products or services of your company, in order to optimize its processes.
4. Research market trends
This step is relevant to establish real goals that also adapt to current market trends.
During the pandemic, a large number of businesses were subjected to sudden and untimely changes.
Many went under and others took advantage of the trends of that time to grow and boost their sales.
Your business must be able to survive changes, or fluctuations in the market, and that is something you can predict with your sales budget.
Look at this example: right now there is a clear and forceful trend, and that is that companies need to join digitization.
If you analyze the market and discover that this trend could improve the competitiveness of your company, help you capture more leads and generate more sales, then you can design a plan to embrace those changes and maximize the results.
According to one publication of Zendeskyou can start by making a market study and then refine your tactics or strategies by researching new trends.
5. Empower your sales team
Your sales team is more important than you imagine. Literally, it will be in charge of executing the sales plan that will help you raise your billing.
If you have people within that team who do not meet their goals, or who do not drive the growth of your company, it is time to take action on the matter.
However, you need to view your sales team as objectively as possible, and analyze their individual capabilities, to ensure that they can successfully achieve their goals and not get frustrated in the process.
For this, it is necessary that you establish individual meetings to find out what they think, how they approach clients, how they carry out their sales processeswhat are your expectations, etc.
6. Talk to your customers
So that you can have a better overview of the news of your company, you need to maintain a assertive communication and recurring with your clients.
In this way you will know why they bought your product or service, what aspects you could improve, how they perceive the after-sales service, and you will even know if they would buy from you again, or if they would be willing to recommend your company.
7. Set goals
Now that you have valuable information, you need to set goals for the sales team. They must have two fundamental aspects:
They must be measurable
For this, specific time periods must be determined: annual, quarterly and weekly.
have to be realistic
The goals that are established must be aligned with the reality of the company and with the context in which it develops.
If you set goals that are unattainable, unrealistic, or that cannot be quantified, you will face a lot of problems.
8. Determine the expenses
Make a list of the expenses of your company. The most common are employee salaries, rent, service payments, product costs, tax payments, etc.
All these expenses will influence the value of your products in the market and will also help you establish your profit margin and sales goals.
9. Develop the budget
Now is the time to start writing and organizing your sales budget, since you already have all the information that you must include in it.
Start with basic aspects that allow you to have a better visualization of the accounts, such as current sales and the projection for the next month or quarter. Look at this simple example:
10. Define tasks and activities
To carry out the goals you set, it is important to assign activities and tasks to your team.
Taking the example of the table above, if you established an increase of five sales per quarter, you will have to define the activities that will help you reach that goal. Some could be:
- Capture 30 potential clients every three months.
- Get a minimum of five extra contacts for each potential client.
- Schedule 15 meetings with your prospects.
- Get ten potential customers to try your products or services (you can work with samples or freemium versions as appropriate.)
- Close five new deals per quarter.
Components that a sales budget should have
A good sales budget includes at least these three components:
Establish the income you expect to generate during a certain period (usually a year).
Although monthly, quarterly, bi-annual or project budgets can also be made, depending on the needs of the business and the volume of sales.
You need to pin down the expenses associated with generating that revenue, such as employee salaries, advertising costs to promote product or service offerings, and more.
In the same way, you must take into account the channels on-line and offline that will involve ongoing expenses, such as ads on social networks or the email marketing campaigns that will allow you to convert leads into recurring customers.
All companies must have a Reserve fund that allows them to overcome moments of crisis without compromising their cash flow.
In this way, they will be able to respond to certain fortuitous situations without going under, such as low payroll, inflation or increases in raw materials.
In this sense, the priority is to maintain high levels of productivity without compromising the company finances.
Why is it important to have this type of budget?
These are some of the reasons that will motivate you to work on your own sales budget:
- You will be able to keep your business on track and totally focused on the achievement of its objectives.
- You will plan future expenses in advance and with certainty.
- You will determine the return on investment in a more realistic way.
Example of a budget for a business dropshipping
Suppose you manage a business of dropshipping and that on average you usually sell 1000 laptops during each quarter.
But it turns out that one fine day you decided to invest a little money in ads on instagram and since then you have noticed a considerable increase in sales. (You are now selling an additional 400 computers each quarter.)
Taking this information into account, your budget should reflect that each quarter your sales will grow by 400 units. Let’s see this information graphically:
Sales budget: Dropshipping of laptops
Are you ready to work on your company’s budget?
Now you know what a sales budget is and why it is so useful if you sell products or services on a recurring basis.
If your company is emerging, you could develop it on your own through tools such as Excel, but if it is very large, the ideal is to invest in specialized software.
In short, this document will give you a great sales forecast and help you plan more efficiently.
Also, by predicting the future sales of your company, you could carry out better internal and external investments to make it increasingly profitable.
Continue reading: 6 effective persuasion techniques to boost your sales