Sales and marketing budgeting refer to the process of estimating costs and allocating funds for various sales and marketing activities that a company plans to undertake in a given period (e.g., one year). This budgeting process involves analysing historical sales data, market trends, and competition to create a comprehensive sales and marketing plan. This process includes information on the projection of annual sales (quantity and value), and marketing costs, including promotion, distribution, salesforces, and other associated costs. These details are essential to identify sales and marketing costs for the financial study. Sales are the significant operating cash inflows, whilst marketing costs are cash outflows, and thus, these estimates influence the project profitability. Besides, the sales and marketing cost budgeting ensures that the company allocates the right amount of resources to its sales and marketing activities while also ensuring that it stays within its financial constraints.
Step-By-Step Process
- Clarify the outcomes of identifying the key market components, including customer segmentation, market analysis, business concept, and business strategy. For more information on these market components, read our previous blogs on the same subjects.
- Identify the company’s sales and marketing objectives, such as increasing brand awareness, expanding the customer base, and improving customer retention. These objectives will help determine the types of activities needed to achieve them and the resources required.
- Analyse the market to identify trends, competition, and customer behaviour, as this will help create an effective sales and marketing strategy and estimate the costs involved.
- Prepare the sales plan of the project for (5-10) years.
- Estimate the salesforce costs of the project for (5-10) years.
- Estimate the promotion costs (e.g., advertising, PR, event management, discounts, and free goods) of the project for (5-10) years.
- Estimate the distribution costs of the project for (5-10) years.
- Estimate the other costs like communication, transportation, fuels, hospitality, and IT costs of the project for (5-10) years.
- Prepare a table showing the yearly revenues and the marketing costs for (5-10) years.
- Prepare a budget document highlighting the above outcomes, and share it with your team and experts.
Example
Here are the budgeting costs of the marketing and sales for a pharmaceutical manufacturing company:
| Sub-accounts | Year 1 ($/Yr.) | Year 2 ($/Yr.) | Year 3 ($/Yr.) |
| Sales & distribution staff costs | 148,320 | 218,010 | 225,150 |
| Communication costs | 5,998 | 90,538 | 233,336 |
| Travelling costs | 9,881 | 149,157 | 384,408 |
| Office supply costs | 2,470 | 37,289 | 96,102 |
| Staff development costs | 494 | 7,458 | 19,220 |
| Marketing- Internet and IT costs | 9,689 | 146,248 | 376,912 |
| Promotion costs | 130,226 | 1,965,765 | 5,066,187 |
| Event management costs | 34,584 | 522,048 | 1,345,427 |
| Distribution costs | 88,931 | 1,342,410 | 3,459,670 |
| Vehicle fuels and maintenance | 7,411 | 111,867 | 288,306 |
| Printing costs | 14,822 | 223,735 | 576,612 |
| Advertising costs | 49,406 | 745,783 | 1,922,039 |
| PR costs | 24,703 | 372,892 | 961,019 |
| Hospitality costs | 4,941 | 74,578 | 192,204 |
| Sales & marketing transportation | 9,881 | 149,157 | 384,408 |
| Goods transportation | 83,990 | 1,267,831 | 3,267,466 |
| Other sales & market costs | 18,772 | 222,743 | 563,954 |
| Total | 644,519 | 7,647,508 | 19,362,419 |
Useful Tips
- Conduct market research to understand customers and competition and to estimate sales.
- Seek advice from experts and involve the team and other stakeholders to develop a sale plan and budget.
- Set realistic estimation of annual sales and costs.
Things To Avoid
- Avoid inaccurate estimations.
- Avoid personal judgement and consult key stakeholders.
Final Note
This article is sourced from my new book- Your Guide For Preparing An Industrial Feasibility Study.
For more information about the book: https://growenterprise.co.uk/book-your-guide-for-preparing-an-industrial-feasibility-study/
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The author: Munther Al Dawood- Industrial Enterprise Expert
Grow Enterprise 