SALES Budget &

sales QUOTA

BASIC TERMS

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POTENTIAL• This refers to the highest

possible level of achievement, whether at the company level or at the industry .

• In practice, full potential is almost never reached, so actual sales are typically somewhat less than potential.

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Market potential• it is the maximum market

( industry) demand, resulting from a

very high level of industry marketing

expenditure, where further increases

in expenditure would have little

effect on increase in demand

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Company sales potential is

the maximum estimated

company sales of a product

or service, based on

maximum share (or

percentage) of market

potential expected by the

company5

sales forecast

• A sales forecast is a projection of

the expected customer demand

for products or services at a

specific company, for a specific

time horizon, and with certain

underlying assumptions.

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Forecasting Approaches

• Top-down or Break-down approach

• Bottom-up or Build-up approach

companies usually use both approaches to increase their confidence in the forecast

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Steps followed in Top-down / Break-down Approach

• Estimate industry sales or market

potential

• Calculate company sales potential

{market potential x company share}

• Decide company sales forecast

(lower than company sales potential

because sales potential is maximum

estimated sales, without any

constraints)19/04/23 8

Steps followed in Bottom-up / Build-up

• Salespersons estimate sales expected from their customers

• Area / Branch managers combine sales forecasts received from salespersons

• Regional / Zonal managers combine sales forecasts received from area / branch managers

• Sales / marketing head combines sales forecasts received from regional / zonal managers into company sales forecast, which is presented to CEO for discussion and approval

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Sales budget Sales budget is the estimate

of expected sales volume in units or revenues from the company’s products and services, and the selling expenses.

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Purposes of the Sales Budget

• Planning

• Coordination

• Control

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Requirement of a successful budget

• Support, interest and involvement of top management

• Flexible budgeting

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SALES QUOTA IS……• Sales quotas are sales goals or targets

(quantitative objectives) set by a company

for its sales units for a time period

• sales units are regions, branches,

territories, salespeople, and intermediaries

• Generally, company sales budget is broken

down to sales quota.

IMPOTANCE OF QUOTAS

• ACHIEVE ORGANIZATIONAL TARGET

• PROVIDE PERFORMANCE TARGET

• PROVIDE STANDARD

• PROVIDE CONTROL

• PROVIDE DIRECTION

• TOOL FOR MOTIVATION

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CHARACTERISTIC OF GOOD SALES QUOTA

• Fair

• Challenging

• Flexible

• Easy understandable

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Types of Quotas

• Organizations set many types of sales quotas:

• sales volume• units• activity• combination

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