What is a sales budget?

Use, example, and purpose

zendesk.com/in/blog/sales-budget

Every company needs a sales plan. Without a plan, it’s easy to lose track of sales goals,
lose momentum, and ultimately, lose money. Sales budgets can help—they make it easier
to form concrete sales plans and greatly simplify sales management.

In this article, we’ll cover what a sales budget is, why it’s important, and how to best
create one for your business. We’ll also explore a few examples of sales budgets for
different tracking periods.

What is a sales budget?

A sales budget is a financial plan that estimates a company’s total revenue in a specific
time period. It focuses on two things—the number of products sold and the price at which
they are sold—to predict how the company will perform.

A sales budget isn’t the same as sales forecasting, which is the process of estimating future
sales revenue. But a solid sales budget may be used to inform a sales forecast. A sales
budget is also different from a sales expense budget, which focuses on company expenses
over a certain period of time.

What is a sales budget used for?

The sales budget is a planning tool that allows companies to manage resources and profits
based on expected sales. It takes into account previous sales patterns and budgets for
similar time periods so that each department can have a big-picture idea of where they
stand financially. This helps companies be more efficient in reaching their goals and
maximizing their profit.

The sales budget is also invaluable when it comes to setting realistic targets. For instance,
a sales team may have a sales goal of increasing customer subscriptions by 50 percent, but
the sales budget will keep expectations leveled by reflecting an annual increase of 20
percent. This doesn’t mean 50 percent isn’t achievable; it simply means that when
budgeting based on revenue, the 50 percent should be a bonus, not an expectation.

Importance of a sales budget

Sales budgets are crucial for managing expenses—no department wants to exceed their
allotted budget—as well as setting sales goals. Clear, specific goals drive teams forward as
they work together to achieve growth, even if it’s a simple 1-percent increase in sales
productivity.

How to make a sales budget

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Now that you understand what a sales budget is and why it’s important in your business,
let’s explore how to make one.

What’s included in a sales budget?

When diving into sales forecasting or budget preparation, it’s important to ensure your
components are prepared and accurate before starting your plan. Depending on the size
of your business, you may have a larger or smaller sales budget spreadsheet than others,
but all sales budgets should include three key elements:

1. Income statement: contains the net income of the company and gives a general
financial overview of how the company is doing.
2. Balance sheet: lists a company’s liabilities, assets, and equity for a given
budgeting period.
3. Cash flow statement: reports cash received and cash spent for a certain
budgeting period.

Once these three documents are compiled, you’re ready to prepare your sales budget.

A step-by-step guide to creating a sales budget

There are seven basic steps to preparing your sales budget.

1. Choose a time period

First, you must decide on the budgeting period. This time period is usually monthly,
quarterly, or annual. Anything shorter or longer is generally either not useful or
inaccurate. The period you choose will depend on what your business sells and needs. If
your products are consistent year-round, then a monthly budget might be best. If your
products change depending on the season, then a quarterly budget might suit you better.

2. Take stock of your inventory and prices

In order to know what your sales might be in the future, you need to know what your
prices are and what products you have available—and if that will change. Will you be
keeping prices the same? Raising them? Lowering them? Will you be getting new
products or discontinuing any? These questions will help you predict your expected sales
more accurately.

3. Look at your past sales data

You’ll want to review data from the previous period that matches your current sales
budget period. This not only makes your predictions easier but also makes them more
realistic. If you’re putting together a sales budget for August and the two previous Augusts
show less than a 2-percent increase in sales, then it’s probably not a great idea to predict a
10-percent increase in sales for the upcoming August.

4. Compare your data to the current industry

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It’s important to align your goals with the current market and competition. By comparing
your sales data to that of other similar companies, you can gain perspective on where your
sales goals fit and where they might need adjusting. You can view the sales data of other
businesses on the U.S. Bureau of Labor Statistics website.

Comparing data can also be reassuring. You might be panicking because your sales fell in
2020, but the reality may be that there was a drop in sales across your industry. Some
years are simply easier or harder on certain sectors or products.

5. Talk to your sales reps and customers

Both your sales reps and customers can provide valuable feedback to inform your sales
budget. Your sales reps are close to your customers, so they can tell you more about buyer
expectations, disappointments, and wants. For example, sales reps for a soap company
will know if there are certain scents the company should invest in due to customer
interest.

Of course, the people using your product will also have insights to share. Request
customer feedback to learn what your buyers are thinking, feeling, and experiencing.
Communicating with your customers also increases trust in your company and is a
fantastic social selling tool.

6. Factor in market trends and current events

Sometimes, the market is beyond your control. As the pandemic continues to impact
businesses, 2021 and 2022 sales budgets need to take additional factors into
consideration. How much might you need to charge for shipping if in-store purchases stay
low? If your products are luxuries, might you expect a decrease in sales? Keep in mind
how current events can affect even your most loyal customers.

7. Create your budget

Now it’s time to build your budget. We’ll dig into an example of a monthly and an annual
sales budget below, but if you’ve done steps one through six, you should be in good shape
to create an accurate, clear, objective-focused sales budget.

Sales budget best practices

Even with all the right tools in hand, there are still best practices to keep in mind when
producing your sales budget. Follow these tips to ensure your team is well-informed and
better-equipped to achieve company goals.

Keep objectives clear: Make sure you know what you want to accomplish in your
future sales period. Are you trying to increase the number of customers? General
revenue? Number of units sold? Answering these questions will guide your team to
achieving goals and changing behavior.

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 Outline key activities: Once you know your objectives, take the time to detail
important sales activities. Simply stating your team is going to raise profits by 3
percent isn’t a game plan. With benchmarks along the way and a strong sales plan,
your team can come together to find success.
Generate solid expense estimates: Ensure you’re aware of any expenses you’ll
need to incur in order to achieve your projected sales budget. For instance, if you’re
launching a new product and you’re going to need additional marketing materials,
that money should be deducted from the net sales for that product.
Coordinate and communicate often: Communication is critical to the success
of any business venture. When creating a sales budget, all teams need to be involved
and aware of the changes and predictions being made. This includes the sales
department, marketing department, administrative teams, and production teams.

Sales budget example

With the sales budget process and best practices in mind, let’s take a look at a sample
monthly and annual sales budget spreadsheet for a small business. Keep in mind that the
template you use may differ depending on the size of your company and the type of
products sold. After all, there are several useful business budget templates for Excel
available around the web. Regardless of the one you opt for, the general idea remains the
same across the board

Monthly sales budget example

Monthly sales budgets, as expected, are simpler and smaller than annual and quarterly
budgets.

For this budget, let’s assume a photography business offers three photo packages:
Package A (three prints – one size), Package B (five prints – two sizes), and Package C (10
prints – three sizes).

Below is an example of how they might outline their sales budget for each package.

It’s important to remember that these numbers are influenced by market trends and past
sales. Say this is the sales budget for December. While the larger package might not be the
highest sold in other months, holiday photos tend to be sold in large batches and sizes for
family distribution or postcard printing. This means the business can assume (based on
previous sales) that they will see an increase in Package C sales.

Monthly sales budgets are frequently created on a monthly basis alongside MRR (monthly
recurring revenue) forecasting.

Annual sales budget example

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The annual sales budget is much larger because it needs to evaluate each product over a
longer period of time. The table below is an example of one product on an annual sales
budget sheet. Let’s review an annual budget for the same photography business and look
at Package C over the course of a year, assuming the year starts in January.

You can see how Package C changes depending on the quarter.

Quarter 1 (January–March): the slowest season for large photo packages.

Quarter 2 (April–June): picks up considerably thanks to graduation season.
Quarter 3 (July–September): slower than the second quarter but stronger than
the first quarter given it’s back-to-school season.
Quarter 4 (October-December): the busiest quarter due to the holidays.

In a full annual budget, every product would have its own table. Because trends differ for
each product a business sells, keeping track of customer records and preferences is key to
a successful sales budget.

Use a CRM for improved sales predictions

Your future sales estimates are only as strong as your sales analytics, customer data, and
CRM.

With Zendesk Sell and the new Zendesk Sunshine platform, creating consistency and
pipeline visibility for your entire team is as easy as clicking a button. Our system tracks
sales all the way through the sales process and saves customer information so you can
better project which products you’ll sell the most.

Register for a demo today to see what a powerful CRM and a solid sales budget can do for
your company.

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