Understanding A Sales Budget And Its Implications To You In Sales

Written by Sean McPheat | Linkedin thumb

Business, career and placement concept - successful young manDo any of your prospects talk to you about their sales budgets?

If they do, are you fully aware of how they set those budgets and what they use them for?

Here, we discuss what it means to set a sales budget, how it’s defined and the objectives of companies setting budget figures.

It will help you develop a rounded-out knowledge that will help you when identifying what to do when confronted with a budgeting issue.

Firstly, and obviously, what do we mean by a sales budget?

Well, one way we define it is it provides an estimate of the volume of goods and services that a company proposes to sell in a future period. It is usually made for the following year. Most sales budgets include monthly and quarterly figures as well. Additionally, the budget provides details in both monetary figures and in units.

A company accesses data from various sources when it prepares a sales budget for the next year. How does a company get the information it requires to make its budget? Knowing this will help you develop a sales proposition in line with its future plans.

First, the company will look at its sales from the previous year – most firms try to exceed last year’s sales figures. This can be done by selling more to the same customers or by looking at new markets. A company could also try to increase its sales by launching new products.

Secondly, it uses future estimates for how well they think the company can perform in the next few months. These ideas can give a realistic figure for the sales expected in the next year.

Naturally, the company has to take into account any changes that are happening in the near future. Are they planning to expand their operation or cut back? Is the market planned to get larger or contract? Bearing these in mind can have a big impact on the way the company is looking at the future budgets it will lead with.

So, the planning of a sales budget provides details of the amount of money that a firm estimates it will receive from the sales of its goods and services in a particular period. That helps you to help the buyers to plan for the next few months or years, with your solutions proving a main assist in achieving their goals.

Sales budgeting, therefore, is to plan for and control expenditure of resources (money, material, facilities and people) necessary to achieve the company’s desired sales objectives. It aims at leveraging and maximising profits.

Each different department within the company you would be working with usually demands additional funds and so there could be deviation from any agreed sales budget. There should, of course, be scope for deviations in sales budgets, as they are agreed at the time of development.

Now, what does this information enable you to do as a sales consultant to their business?

1) It gives you knowledge as to what the short- and medium-term plans are for the prospect’s business

2) It creates a clearer picture of what the gaps are between where they are now and where they are going to be in the future

3) It opens discussions between you and their company regarding which direction their business is going and what the buyers’ expectations are

4) It helps you determine if there are any immediate plans for spend that you could tap into, or whether those spending plans are being put on hold

5) It creates chances for you to see how your solutions can fit into their plans and what the spending plans would include, possibly in relation to your solutions

Sales budgets are a pre-requisite for any company and their expansion plans for the near future. You being aware of how these budgets are set and in what direction they are going to take the company you are dealing with, will give you a clearer picture of how you can discuss options that your solutions can provide for the buyer and their departments or overall company.

Happy Selling!


Sean McPheat

Sean McPheat
Managing Director

MTD Sales Training | Image courtesy of Big Stock Photo

Sales DNA

Originally published: 11 November, 2019

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