To prepare a sales budget , it is first important to understand the four key elements that this tool should contain:
Quantity in units expected to be sold of a product.
Price per unit of the product.
Time period covered by the budget.
Information on the economic environment.
Once you have these elements, it's time to put together the budget. As usual in financial matters, there are multiple methods to do so, but in essence, they all have the same four basic steps:
Information gathering.
Consolidation of information.
Budget calculation.
Conversation and strategy.
Below, we will show you more details number database about each key element and then continue with the steps for creating the budget.
Quantity in units expected to be sold of a product
Basically, you need to know how many units you have of what you want to sell.
Remember that this applies both to those who produce to sell and to those who buy to sell. In the latter case, you need to know the sales capacity of your suppliers to know exactly how many goods you will have to sell.
Price per unit of the product
This is the price per unit determined by the sales price (what is the monetary value that you should set for that product according to different internal and external factors).
Here it is necessary to consider the competition, market behavior, whether there is a seasonality that you should take advantage of or a strategy that requires an adjustment to that price.
Time period covered by the budget
This is the period over which you will divide the sales of your product. This depends on the goals you set for yourself, as well as the periods you wish to measure.
Some products will be measured by month, quarter, or annual performance. It is even possible that a single budget will measure multiple periods or be aligned with your fiscal calendar.
Information on the economic environment
This is where all the financial intelligence that helps you have more precise information for the other three elements comes in.
Do you have sales data for the same period last year? Do you have market reports that show the average price of a product like yours? Do any of your competitors sell their own version of one of your products? The more complete your environmental framework is, the more accurate—and useful—your budget will be.
Now, we will review each of the steps to make a sales budget . Remember that, although there are several methods in which the number of procedures varies, these are the basic steps that will allow you to generate a budget for your business.