Methods of preparing sales budget

Methods of preparing sales budget

A variety of methods ranging from the sales manager’s gut feeling to application of management science models are used for determining the sales budgets. The popular methods are as under:

What is affordable: This method is generally used by firms dealing in capital industrial goods. Also, companies giving low emphasis to sales and marketing function or having small size of operation make use of this judgemental method.

Rules of Thumb: Such as a given percentage of sales. Mass selling goods and companies dominated by finance function are major users of this method.

Competitive parity: Large sized companies whose products face tough competitions and need effective marketing to maintain profits make use of this method. The use of this method presumes knowledge of the competitors activities and resource allocation.

Objective and Task Method: systematic method help in determination of the sales budget by identifying the objective of sales function, and then ascertaining the selling and related tasks required to achieve each objective. Later, the cost of each task/activity is calculated to arrive :It the total budget. The finalisation of the budget may require adjustment both in the objectives as well as in the way the task. may be performed

-Zero based budgeting: It is relatively a new approach to budgeting. It involves a process in which the sales budget for each year is initiated from Zero base thus justifying all expenditure and discarding the continuation of conventions and rules of thumb. The method suffers from practical limitations which relate to a very elaborate and time consuming process required by it

In practice, companies make use of a combination of the above methods and depending upon the experience gained sales .budgeting approach stands refined. The status of the sales and marketing function within the organization determines the extent of sophistication used in the approach to sales budgeting.

Sales force Evaluation

Sales evaluation involves an analysis of the performance of your sales personnel. Through sales evaluation, your sales team members learn about their strengths and weaknesses, so they know which areas to improve. If you conduct proper sales evaluations regularly, you may improve the efficiency of your sales efforts and drive up your profits.

A sales evaluation helps to determine which salespeople perform well and which don’t. With that information, you can reward your sales team members according to their performance. Through the evaluation, salespeople may learn of your expectations and set their goals accordingly. You may develop training and counseling programs for the sales team based on the results of the sales evaluation. The evaluation may also lead to a promotion for strong salespeople and termination for weak salespeople.

Sales force evaluation tools Objective Measures

A sales evaluation may contain objective data based on statistics. You may analyze a salesperson’s efforts by measuring the amount of work he puts in. For example, you may count the number of sales calls he makes and the number of customer meetings he has. The sales evaluation may also focus on an employee’s sales results. For example, you may measure how many products a salesperson sells and how much revenue he generates.

Subjective Measures

A sales evaluation also usually contains subjective observation regarding the salespeople’s performance, especially when you have little data for objective evaluation measures. For example, you may have just established your sales operation and not collected enough data to sufficiently reflect your salespeople’s performance. You may not always keep track of how many phone calls a salesperson makes to each customer or how long each call takes. When choosing subjective measures, check that each one affects a salesperson’s performance. You may look at a salesperson’s product knowledge, customer relations, aggressiveness, enthusiasm and compliance with company policies.

Process

Most companies conduct sales evaluations every year, according to Texas Tech University. You can obtain the information for the sales evaluation from various sources, for example from the sales supervisors, the customers and other salespeople. You may decide to talk to the salespeople yourself or delegate the task to the sales supervisors. Assign enough time to discuss all your concerns regarding the salespeople’s performance and give them a copy of the discussion points for their reference.

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