The hardest part of developing a sales budget is to determine the annual sales. It is quite easy to overstate the sales and of course understate expenditure. Here are some rules to help you get to the right sales budget. If you don’t get this right your whole budget and cash flow will be wrong. It is a very good idea to be conservative. Where you are doing a plan for an existing business it is much easier then doing the plan for a new business:
Analyse last year's sales and break them up into product groups. Do this by sales product if you can. Break the sales into monthly figures.
Determine if you are going to do more or less. Have prices gone up - if so is this going to effect your volume. What is the state of the economy - how are your competitors doing. Are interest rates dropping or going up.
Adjust the sales figures for volume.
Adjust the figures for the number of sales people you have. It is important that you break the sales down by sales person.
Take into account any seasonal fluctuations in the business cycle. E.G. which months are the holiday seasons like the April holidays where ther are many public holdidays during the month.
