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 .
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.
Developing a well-structured sales budget is crucial for tracking revenue goals, allocating resources, and guiding strategic decisions However, creating an accurate sales budget can be a challenging process, especially for businesses that are new to budgeting
In this comprehensive guide, we will walk through the key steps involved in creating an effective sales budget for your business
Step 1: Set Goals and Objectives
The first step is to define the goals you want to accomplish with your sales budget. Ask yourself:
- What revenue target do you want to hit?
- How much growth do you want to achieve?
- What key business initiatives will sales support?
Set specific, measurable goals around revenue, growth, market share, and other sales objectives. This provides a destination for your budget to aim towards.
When setting goals, analyze past sales data (more on that next) and consider the realistic growth you can achieve given economic conditions, industry trends, and competitive forces. Stretch goals are good, but make sure they are grounded in reality.
Step 2: Analyze Past Sales Data
Examining historical sales data provides the foundation for forecasting future revenue. Gather data on:
- Past sales totals, growth trends, and seasonal fluctuations
- Sales by product line, business unit, or geography
- Customer retention and churn rates
- Average deal size by customer segment
- Effectiveness of current sales processes
Look for patterns, growth opportunities, and risks that may impact sales going forward. Identify where your sales process needs strengthening to hit revenue goals.
Step 3: Determine the Sales Budget Period
Typically, sales budgets cover either a fiscal year or calendar year. But you can create a budget for any period that aligns with your business planning cycles, such as half-year, quarterly, or monthly.
Shorter budget periods allow for more frequent monitoring and adjustments. Annual budgets lend themselves to broader goal setting and strategic allocation of resources.
Step 4: Estimate Sales Revenue
Next, make an informed projection of total sales revenue for the budget period. Start by analyzing sales data by month, product line, or region. Then factor in goals, growth trends, and market conditions to estimate monthly or quarterly sales totals.
To increase accuracy, build your sales budget from the ground up for each business unit, sales rep, product line, service offering, and customer segment based on current sales pipelines and historical close rates.
Step 5: Allocate Sales Budget
With your revenue forecast complete, the next step is to allocate budget to support your sales activities and operations. Consider expenses like:
- Sales staff salaries + benefits
- Commissions, bonuses, and incentives
- Lead generation and marketing campaigns
- Travel, entertainment, and customer events
- Sales tools, software, and subscriptions
- Training and sales enablement
Determine what resources and activities are needed to hit your sales goals. Assign budget to focus on the highest value sales activities and infrastructure.
Step 6: Monitor and Adjust
The final critical step is monitoring actual sales results vs. your budget forecast and making adjustments as needed. Review sales reports and meet with sales managers regularly to address:
- Revenue pacing and shortfalls
- Changing customer needs or market conditions
- New growth opportunities
- Resource allocation and capacity issues
Course correct by adjusting sales goals, reallocating budget, or implementing new sales strategies. Use your sales budget as a living, breathing plan rather than a fixed document.
Key Tips for Sales Budgeting Success
Follow these tips for creating and managing an effective sales budget:
- Involve sales managers early in the budget process for buy-in
- Build conservative estimates using historical data
- Include contingencies for economic fluctuations
- Automate data collection from your CRM
- Establish regular budget reviews and status updates
- Tie sales compensation to budget goals
- Adjust quickly but carefully based on variances
With an accurate sales budget in place, you gain critical visibility into revenue attainment and can flexibly adapt to changing business conditions. Stay nimble, align budgets with broader goals, and use your sales budget to drive growth.
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.
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.
How to Prepare a Sales Budget
How do you prepare a sales budget?
1. Set a time frame. Sales budgets cover fixed periods of time — typically one year at a time. That said, sales budgets can also be set to cover weeks, months, or quarters. No matter the time frame you go with, if you want to prepare a sales budget, you have to start with the when.
How long should a sales budget be?
Sales budgets cover a set period of time to enable focussed planning. How long this time period spans is entirely up to your business. Some choose to do this by months, quarterly, or annually. And some choose weekly, for example, if a business is highly geared towards seasonal sales like Christmas.
How do you calculate a sales budget?
Calculating a sales budget is as easy as estimating the number of units you expect to sell and multiplying it by the selling price. Don’t forget to make adjustments based on historical data and market trends. Need more guidance? Check out this guide on how to create a sales budget.
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.
