A Sales Budget is Central to Effective Business Planning

Your Sales Forecast

Budget planing with calculator and pie charts.
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Are we planning correctly - will we make money? How do you know? The answer lies in developing and analyzing the operating or master budget for your business. The first and most basic component of the operating budget is the sales budget, which lists the expected units and revenue expected from the sales plan (do you have a sales plan?). The more accurate your sales forecast, the more effectively you can manage the business.

The sales budget memorializes a business' sales expectations for the coming accounting or budget period and attaches gross revenue to the sales plan. It is expressed in both units and dollars. Smaller companies, with limited product categories and territories, may develop the sales budget for the business overall. Larger companies, with an array of products, usually aggregate the budget into product categories and/or geographic regions for the sake of simplicity and getting the job done on time. The sales budget is usually prepared and presented in a monthly or quarterly format (a yearly format provides little actionable insight and does not highlight opportunity).

Several departments contribute to the sales budget. Of course, the majority of input comes from the sales team, who deal with customers on a day-to-day basis. Marketing contributes promotional information, which can affect both the timing and volume of sales.

Engineering may have insight into new product development and release dates, as well as the discontinuance of older products. The executive team may review and revise these figures based on planned divestitures or acquisitions.

Key to a realistic and successful sales budget is its comparison with the budget from the previous year and previous quarter.

An Example of a Simple Sales Budget

If we use ArtCraft Pottery as our example, which comes from the article on Budgeting - How to Develop the Operating Budget, the following information can be used to develop the sales budget:

The following is the information for quarters 1 through 4 for ArtCraft Pottery. The selling price per piece of pottery is $10.00. We need the sales budget for each quarter plus the total for the year. These are ​forecasted sales figures provided by the salespeople out in the field.​

Sales Budget for ArtCraft Pottery

Unit Selling PriceX $10X $10X $10X $10X $10
Budgeted Sales$10,000$12,000$15,000$20,000$57,000



A sales budget is wishful thinking without a sales plan. A sales plan co-exists with a marketing plan, and together they plot out for a specific period of time, based on current knowledge,

  • The objectives (broadly stated)
  • The goals (finite and measurable)
  • A definition of your target market
  • The strategies and tactics that may work the best and why
  • Sales team quotas and motivations
  • Budget
  • Timeline

The sales plan is not etched in stone. Instead, view it as a line in the sand. It lives and breathes and loves to be updated with new information, which may support or derail previous thinking and plans.

It is directional and gives trajectory and purpose to the efforts of your sales team.