SALES Budget & sales QUOTA

BASIC TERMS

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POTENTIAL
This refers to the highest possible level of purchasing, whether at the company level or at the industry or market level. 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 (or
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

company
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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

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)
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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 companys 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.

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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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