A Look at Sales Budgets & the 7 Steps to Creating One [+ Templates]

Sales is rarely directionless. Every aspect of the practice requires established expectations and some degree of guidance — and in many cases, “expectations and guidance” amount to firm predictions of a sales org’s performance.

Those predictions often come in the form of something known as a sales budget — a document that sets realistic standards for how much a sales org is expected to sell within a given time frame.

These plans are central to processes like goal setting and forecasting. To help give you a better grasp on sales budgets as a concept, we’ve gathered some key information that will help you better understand the what, why, and how behind these documents.

• What is a sales budget?
• Why is a sales budget important?
• The Purpose of a Sales Budget
• What elements should my sales budget include?
• How to Make a Sales Budget
• Sales Budget Templates
• Examples of Sales Budgets
• Sales Budgets Best Practices

What is a sales budget?

A sales budget is an itemized plan that predicts your total expected sales revenue by considering the number of units you anticipate selling and the price you intend to sell them at. It sets a reference point for how much money you expect to bring in during a given period to guide goal setting and financial forecasting.

Sales budgets are often conflated with sales forecasts. That kind of mix-up makes sense. The two are fundamentally similar in that they both offer some kind of prediction of sales figures over a given period, but they differ in terms of intent and time frame.

A sales budget provides a realistic but ideal direction for your company to pursue. It provides a baseline understanding of what you should expect out of your sales org, and a sales forecast is often a natural extension of that.

Sales forecasts take the information from the budget and set predictions for how likely you are to live up to those expectations. Forecasts also tend to cover smaller periods of time. They generally set predictions on a weekly, monthly, or quarterly basis.

Sales budgets, on the other hand, typically account for an entire year.

Why are sales budgets important?

Setting a realistic sales budget is important for measuring the success of your sales team. By projecting how much you need to spend on sales throughout the year, you can meet company expectations and avoid unnecessary expenses.

Another way to think of your sales budget is to think of it in conjunction with your sales goals. To meet your goals this upcoming year, what expenses might you incur? By answering and evaluating this question, you can make sure your sales budget maximizes profit while encouraging company growth.

The Purpose of a Sales Budget

Sales budgets and the insight they offer have a variety of applications. Here are some of the most prevalent ones.

Dictate Expenses

A sales budget guides an organization’s financial planning and objectives. It gives managers a reference point for the expectations and standards they’re working with. With that picture in mind, leaders can set better-informed, more effective overhead and administrative budgets.

Help Set Objectives

A sales budget sets firm expectations for profitability — giving your sales org a sort of North Star for its expected performance and the goals it needs to set to realize it. This plan can also help with setting quotas and keeping more accurate tabs on team performance.

Measure Ultimate Performance

At its core, a sales budget is a benchmark against which a sales department’s success can be measured. It sets definitive expectations for what your company expects your org to deliver and, in turn, a way to see how effective its process and efforts are.

Without one, you’ll have a harder time determining whether your sales strategies helped or hurt your ultimate performance.

What elements should a sales budget include?

When diving into sales forecasting or budget preparation, it’s important to ensure your components are prepared and accurate before starting your plan.

Depending on the size of your business, you may have a larger or smaller sales budget spreadsheet than others, but no matter your organizational size, consider identifying these three key elements.

Cash Flow Statement

A cash flow statement (CFS) summarizes how cash and cash equivalents move in and out of your sales team. A CFS measures how your team manages its debt while funding operating expenses.

Your CFS might include:

• Interest payments.
• Rent/mortgage payments (if applicable).
• Income tax payments.
• Receipts from sales.
• Salary and employee wages.
• All other operating expenses.

Balance Sheet

A balance sheet is a financial document that details how much your organization is worth by listing out all assets, liabilities, and equity your company has by a specific reporting date.

A balance sheet might be prepared and distributed on a quarterly or monthly basis, depending on local laws or company policy.

A sales team balance sheet is important because it offers insight into the health of your team. Your balance sheet can also be used by potential investors to decide whether or not to invest in your company.

Income Statement

An income statement is the net income of your department, which gives a general overview of your financial state. Your income statement will list expenses, gains, revenue, and any losses your business experienced during a specific time period.

An income statement provides insight into the efficiency of a company, which sections are underperforming, and your performance relative to other departments.

By identifying your cash flow statement, balance sheet, and income statement, you should have a better idea of the overall financial health of your sales team and which areas need improvement.

How to 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.

2. Find your prices.

The next key component of a sales budget is pricing.

You can’t predict revenue if you don’t know how much each unit you sell is going to cost, so you have to pin that side of your plan down right off the bat. And if there’s any chance those prices are going to vary at any point in your selected time frame, you need to account for that as well.

3. Look at previous data from a similar period.

Here’s where you start trying to understand what to expect from your sales efforts. One way to do that is to pull historical data that offers some perspective on how your sales org typically performs around the time of year you’re budgeting for.

4. Compare your data to your industry and competition.

Another angle you can take when preparing a sales budget is to look at your competitive landscape. How are your industry peers performing?

If you and another company share a similar market position, try to look into its sales figures to better understand what you can expect from your prospects and customers.

5. Talk to customers.

Sometimes it helps to hear directly from your buyers to get a pulse on your offering’s appeal, longevity, and potential profitability. Are people still enthusiastic about your product or service? Is there a competitor that might siphon consumers’ interest in your business?

Taking action like sending surveys or directly communicating with your base can offer some invaluable information to shape your sales budget.

6. Identify market trends.

How has the product for your market been trending recently? You can only understand your future performance so well from looking into the past.

If the market for your product service has been consistently trending downwards in recent years, your historical data might not do all that much for you. Remember, you’re predicting sales figures — not copying them.

7. Create your budget.

With the listed factors — among others — behind you, you can get a solid feel for how many units you can expect to sell and, in turn, put together an accurate sales budget.

Sales Budget Templates

The structure of your sales budget will vary based on the number of products or services you sell and whether you offer any sort of discounts. Here are a few templates that cover those bases.

One Product or Service With No Discounts

Multiple Products or Services

One Product or Service With Discounts

Examples of Sales Budgets

Here’s an example of a sales budget from a firm that expects to see varying sales at different price points throughout the year.

Here’s an example of a sales budget from the same firm, but including a projected 5% sales discount and allowances to determine their total net sales.

Sales Budget Best Practices

Knowing how to craft an accurate sales budget can help keep your sales org on track and operating as efficiently as possible. Here are best practices to help you get started.

Prepare for unexpected expenses.

Even the best budget needs a little wiggle room for unexpected expenditures. With inflation and potential economic uncertainty, prices of airfare, hotels, and dinners can unexpectedly increase in price. If your sales team attends shows, these turbulent prices will impact your budget.

Even if you don’t travel, shipping costs have increased and will likely continue to do so. Make sure you’re aware of expenses related to sales deals and product launches in the coming year.

Plan your objectives.

What goals does your sales team want to accomplish this year? Do you have a revenue goal or perhaps a new customer goal? By identifying these goals, you will be able to anticipate some of your upcoming expenses.

Be sure to list out how you will achieve your upcoming goals, with benchmarks you’ll meet along the way.

Anticipate your upcoming sales year.

With a potential recession on the horizon, how might your customers’ spending change? If you sell nonessential products, you’ll want to anticipate any dips in sales or revenue and plan accordingly.

You want your sales budget to reflect the market. If the market is tight and unpredictable, you want your budget to be both comprehensive and followed strictly.

Building Your Sales Budget

A detailed sales budget can help your team have a productive year by meeting goals and making sure you’re fiscally conservative. Be sure to present your budget to executives and team members soon after it is drafted. Check back often to ensure you’re on target to be under budget each quarter.