Sales Budget,Sales Budget,Sales Territories & QuotasSales Territories & QuotasBy:

Vibhor Jain

Sales BudgetSales Budget

� Blueprint for making profitable sales

� Details of

◦ Who is going to sell

◦ How much◦ How much

◦ Of what

◦ During the operating period

◦ To which customer

PurposePurpose

� Instrument of Planning

� Mechanism of control

◦ Composite of sales, expense & profit goal◦ Composite of sales, expense & profit goal

◦ Yardstick to measure progress/ performance

◦ Identify weaknesses

◦ Revision or Correction

Form & ContentForm & Content

� Statement of projected sales revenue & selling expenses

� Sales volume in units or currency

� Details of sales volume� Details of sales volume

◦ Unit sales of each product

◦ Unit sales by sales territories

◦ Unit sales by quarter/ month

◦ Unit sales by class of accounts

Budgetary ProcedureBudgetary Procedure

� Usual first stage is the sales budget in an organizational budget

� Once Sales budget is okayed ◦ Production gives budget for manufacturing expenses and inventoryexpenses and inventory

◦ Financial Dept. gives budget for Capex, administrative expenses etc.

� Production is more interested in Unit sales projections & Finance in currency sales figures

Planning StylesPlanning Styles

� Top Down

◦ Based on Theory X (No one like to work)

� Bottom Up

◦ Based on Theory Y (People like to work & ◦ Based on Theory Y (People like to work & take responsibility)

� At least partial Bottom Up approach should be used

◦ Participation at all levels enhances confidence in budget and leads to higher sales

Competition Within Competition Within

� All managers in marketing/ sales present their budgets

◦ Sales Manager

◦ Advertising Manager◦ Advertising Manager

◦ Market Research Manager

◦ Customer Service Manager

◦ Product Managers etc.

� ‘Sell’ your requirements to senior

Competition OutsideCompetition Outside

� All divisions fight for funds from top management

� Top management is like a prospect

� Sales executive gives presentation on � Sales executive gives presentation on budget like a sales pitch

� Focus should be on need/ wants (Profit) of top management

� Correlate requirements with profits

Budget for ControlBudget for Control

�Weekly or monthly progress report prepared by Sales Manager

� Shows sales & expenses for week to date, month to date & year to date

Broken down sales figures are displayed� Broken down sales figures are displayed

� Variance of actual from budgeted is analyzed

� Correction or Revision undertaken

� Not easy to change the budget

ConclusionConclusion

� Sales budget is a statement of projected sales revenue & selling expenses

� Best prepared by Bottom Up approach

� Regular comparison between budgeted � Regular comparison between budgeted and actual paves way for Correction or Revision

Sales TerritoriesSales Territories

� Sales Territory is a group of customers & prospects assigned to an individual sales person

� May be planned geographically� May be planned geographically

� May be non geographical when

◦ Personal acquaintance selling is required

◦ Highly specialized salesperson

Reasons for having Sales TerritoriesReasons for having Sales Territories

1. To provide proper market coverage

2. To control selling expenses

3. To assist in evaluating sales personnel3. To assist in evaluating sales personnel

4. To contribute to sales force morale

5. To aid in the coordination of personnel selling & advertising efforts

Procedure of setting Sales Procedure of setting Sales TerritoriesTerritories

� Select a basic geographical control unit

� Determine Sales potentials in control units

Combining control units into tentative � Combining control units into tentative territories

◦ Shapes may be Wedge, Circular & Clover leaf

� Adjusting for coverage difficulty

How adjustment is done?How adjustment is done?

1. Determine number, location & size of customers & prospects in each tentative territory

2. Estimate time required for each sales 2. Estimate time required for each sales call

3. Determine length of time between calls (the amount of time required to travel from one customer to the next)

4. Decide call frequencies

5. Calculate the number of calls possible within the given period

6. Adjust the number of calls possible during a given period by the desired call frequencies for the different classes of

How adjustment is done?How adjustment is done?

frequencies for the different classes of customers & prospects

7. Finally, check out the adjusted territories with sales personnel who work or who have worked in each area & make further adjustments if reqd.

Routing & SchedulingRouting & Scheduling

� Main purpose of routing & scheduling is

◦ Maintaining the lines of communication

◦ Optimize Sales Coverage

◦ Minimize wasted time◦ Minimize wasted time

QuotasQuotas

� Quantitative objectives assigned to sales organization units

� Specify desired performance levels for sales volumesales volume

� Quotas are broken down at every successive level

� Device for directing & controlling sales operation

ObjectivesObjectives

� To provide quantitative performance standards

� To obtain tighter sales & expense control

� To motivate desired performance� To motivate desired performance

� To use in connection with sales contests

Types of QuotasTypes of Quotas

� Sales Volume Quotas◦ ‘how much, for what period’

� Budget Quotas◦ Set for various units in sales organization to control expenses, gross margins or net profit eg. Expense Quota & Gross margin or net profit Expense Quota & Gross margin or net profit quota

� Activity Quota◦ To control allocation of time/ efforts among diff. activities like sales call, product demos.

� Combination Quotas◦ Both selling & non selling activity quota

How to secure acceptance?How to secure acceptance?

� Participation in Quota setting

� Keeping sales personnel informed of progress

� Need for continuous managerial control� Need for continuous managerial control

Thank YouThank You