The Sales Budget

Why sales budget?

 For making profitable sales
 Who is going to sell how much
 What is he going to sell
 To which customer or classes of trade

 Projection of
 Sales volume
 Selling expenses
 Net profits

 Ultimately defining strategies for

 The kind of sales personnel required
 Sales force size
Estimating budgeted selling expenses
 Using standard cost
 Determination of standard cost of performing a
specific activity
 Comparison with historical cost
 Consideration of the standard performance with the
effects of changed conditions on the cost
 Difficulty in accuracy in estimating distribution
standard cost as compared to production standard
cost

 Other estimating methods

 By average cost
 By forecast method
 By percentage of past selling exp to sales volume
Budgetary Procedure
 Planning styles

 Top down
 Objectives by top management
 Theory X

 Bottom Up
 Tentative goal setting by different departments
 Theory Y
Cont…
 Actual Budgetary procedure
 From the lowest level to upwards
 Budgeting of expenses/cost vs volume/profits

 Handling competition
 Available funds with marketing divisions
 Individual budget requirements
 Past performance
 Focus of the company
 Selling the sales budget to the top management
 Using budget for control purpose

 Effects of errors in budgetary estimates

 Market
forces
 Human errors

 Flexibility in budgeting
 Alternate budget
 Indefinite budget
Management of Sales Quota
 Sales quota
• a quota is an expected performance objective

• a quota is a sales assignments or goal to be

achieved in a specific period of time
• it is routinely assigned to the sales units (e.g.
departments, divisions, and individuals)
• sales units proceed to reach quotas in their
respective
“A domains
sales quota is the sales goal set for a product line,
company division, or sales representative. It is
primarily a managerial device for defining and
stimulating the sales effort.”. … Kotler
 Principles of quota setting
• setting of sales quotas is a challenge to the sales
manager and should be handled with precision
and adequate skill
• objectivity to be observed while fixing quotas
and should be based on facts and figures drawn

from the market

• it must be simple to understand both to the
manager and the sales people
• quotas set above the achievable limit often
demotivate and result in high turnover in the
organization
 Principles..
contd.
• flexible to the prevailing and emerging market
conditions
• it should be fixed either in terms of geographic
territory, on money value, or on the basis of units of
product(s)
• a participatory quota setting procedure followed
jointly by the sales manager and sales people together
serves as a tool of motivation and leads to the
realization of the organizational sales goals
S M A R T
P E T R I
E A T E M
S A E SPECIFIC
CI A
FI U I L
C R N I
A A S
B B T
L L I
E E C
 Procedure for setting sales quota
Individual Goal setting form

Name
Output
Year
Your territory
Results expected
Pessimistic Realistic Optimistic Results
1. Volume per month
2. Expenses per month
3. Gross margin per month
4. Market share per month
5. Key account coverage per
month

Conferencing with each sales person

Types of sales quota
• sale volume quota
• sales budget quota
• sale activity quota
• combination quota
 Methods of setting sales quota
Quotas are based on…
• sales forecasts and potentials

• forecast

• past sales and experience

• executive judgment

• sales people judgment

• compensation
Problems in setting sales quota
1. There is a high level of individual difference in every
organization
2. A perfect quota is a combination of selling and non-
selling activities

3. Often sales people do not give proper attention to the

non-selling activities (e.g. searching for prospects,
handling customer objections, and creating market for
probable entry of new products)
The Sales Budget
 Trigger two key decisions on personal
selling strategy
 The kind of sales personnel
 Sales force size
Thank you