Sales Planning and Budgeting


By the time you are reading this article, the sales year for most firms is virtually over. National sales managers should be putting finishing touches to their 2021 sales plans. If you have not started, you are almost late. But the upside is that you might find this piece useful in crafting a robust plan for 2021.

What is planning?

Planning is inevitable for things we are well aware will happen in the future, as encapsulated in the saying, “By failing to plan, you are planning to fail”. This means that failure to plan is also a plan! Another feature of planning is that it happens before the execution and the result, as it exemplified by “It wasn’t raining when Noah built the ark.”

What then is planning? I would describe it as deciding in advance what to do, how to do it, when to do it and who to do it. It involves anticipating the future and consciously choosing a future course of action.

According to Haimann, “Planning is the function that determines in advance what should be done”. While a goal is a desired future state that an organisation attempts to realise, planning is the act of determining the organisation’s goals and the means for achieving them.

A plan is a blueprint for action that specifies:

  • resource allocations
  • schedules
  • actions necessary for attaining goals
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Pharm. Tunde Oyeniran

Note that:

  • Planning is goal-oriented
  • Planning is a primary function
  • Planning is all-pervasive
  • Planning is a continuous process
  • Planning is forward-looking
  • Planning involves choice
  • Planning is directed towards efficiency.


Benefits of planning

The question is, why should we plan? Here is a shortlist of benefits of a plan:

  1. Focuses attention on objectives and result
  2. Helps to determine new opportunities
  3. Guides decision-making
  4. Helps to anticipate and avoid future problems
  5. Guides in developing effective courses of action (strategies and tactics)
  6. Helps to comprehend and provide for the uncertainties and risks with various options.
  7. Helps to set standards


Obstacles to planning

These include:


  • Lack of accurate information and data. Everyone who has had to plan in Nigeria will easily come against this obstacle. It is even more so in the pharma-industry for lack of openness and data gathering cooperation

it costs time and money to do a plan. Both are usually in short supply for sales managers.

  • Resistance to change by those who should run and implement it, and those who will be affected by it, as it often requires doing things differently
  • Lack of ability to plan.
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Leaders know that effective planning requires knowledge and skills which are not automatically possessed by those whose responsibility it is to plan.

  • False sense of security, by figures generated and assumptions that have been made.
  • Environmental constraints, especially from issues outside the control of the planners – force majeure (remember COVID-19) and policy summersault by governments!


Sales planning elements

Planning is multi-dimensional, certainly with many of the elements interlinked and interconnected. It is even important to point out that the sales figures achieved are consequences of the selling process and execution of activities.

Sales does not just happen. So, such activities must be planned to facilitate results and the desired outcome.

Below are my planning components:

  1. Sales: what products, SKUs, categories? What quantities do you want to sell and when? Better to focus on volume than value/naira. Volume plans are more useful, realistic, accurate and easy to tract
  2. Activities:
    1. Number of calls per day (doctors, specialists, pharmacists, nurses, hospitals, institutions, wholesalers, key accounts, wholesales, distributors, etc.)
    2. Types of calls (Healthcare professionals, specialists/consultants, trade, retail, administrators, primary/secondary/tertiary hospitals, public/provate, etc)
  • Events and meetings
  1. Would you need to cover new territories? If you want quantum growth, you need to plan to significantly increase your geographical, professional coverage, etc. What new market/target indication? What new products are you putting in the market? Would you need to reduce your product list to a manageable proportion?
  2. Head count: How many more (or less) reps would you need to achieve your plan/objectives? Do they need training? How many managers would you need to effectively supervise them?
  3. Prospecting and lead generations. To grow (which is compulsory) you need to expand your customer base and get new customers. You need to plan how, how many and where these will come from.
  4. Other business-development activities and promotions


The figure below provides an overview of budget and budgeting:

The first thing you need to be aware of is that sales budget drives many parts of the organisation: production/importation schedule, overheads, cash-flow, expenditures, including capex, profitability, etc. It is thus a serious business!

Sales budgeting is therefore estimating future levels of revenue from sales, selling expenses, and profit contributions of the sales function.

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From the foregoing, there are three dimensions to a sales budget:

  1. Sales budget – projection of revenue computed from forecast unit sales and average prices.
  2. Selling expenses budget – amount that the department may spend to obtain the revenues projected in the sales budget.
  3. Profit budget – merged sales budget and the selling expense budget to determine gross profit. This, I have found from experience, is usually ignored by most sales managers. Yet, how will the company survive and grow if it is ignored by the chief revenue officer?

Sales forecasting

Sales forecasting is the estimate of a company’s sale for a specified future period. Sales forecasting provides the starting point for assumptions used in various planning activities. It is also used for short-term financial control systems. The financial budget is dependent upon the sales forecast for the projected revenue figures.

There are five levels of concern in sales forecasting: market potential, sales potential, actual sales forecasts, sales quotas, and sales budgets.

Let’s break them further down:

  1. Market potential – it is the highest possible expected industry sales of a good or service in a specified market segment for a given time period. For instance, the market potential for the sales of computer in Lagos state might be two units annually. This is based on buyers’ ability and willingness to buy.
  2. Sales potential – refers to an individual firm’s market share of the market potential; where market share is defined as the percentage of market controlled by a particular company or product. It is the maximum sales a firm can hope to obtain.
  3. Sales forecasts – This is the sales estimate a company actually expects to obtain, based on the market conditions, company resources, and the firm’s marketing plan. The sales forecast is less than the sales potential, since it is based on a realistic set of circumstances.
  4. Sales quota/target – is a sales goal assigned to a sales person, region or a team. It is usually derived from the sales forecasts. Sales goals and objectives sought by management.
  5. Sales budget – This is a management plan for the expenditures to accomplish sales goals. It is derived from sales target, but it is like a more realistic target. Most sales managers are assessed, based on budget; while lower-level sales managers are assess based on target. The difference is usually between 10 per cent and 20 per cent.
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Sales budgeting process

Below is a summary of the process to develop a useful sales budget:

  1. Situational analysis – Sales managers have to look at the magnitude of past differences between budgeted and actual figures and the reasons for these differences.
  2. Identification of problems and opportunities – The actual potential threat and challenges have to be assessed and addressed to determine the probabilities of occurrence and impact.
  3. Development of sales forecast – A sales manager is equipped to forecast sales, using one of the various methods. Projections are made about the anticipated levels of sales by territory, product or type of account. It is expressed both in units and dollars.
  4. Formulation of sales objectives – Once the forecast has been developed, the sales force has to be told what sales target to strive for and what objectives to pursue.
  5. Determination of sales tasks – The sales manager and the entire sales force have to carry a broad array of sales activities, ranging from recruitment to evaluation, and from prospecting to after sales service.
  6. Specification of resource requirement – Refers to the resources that will be required to implement the specified activities and achieve them.
  7. Completion of projections – Here, all the inputs and requests from various units of the sales function are assembled and tied into a comprehensive package.
  8. Presentations and review – The manager presents and defends his sales budget proposal to the management.
  9. Modification and revision – Sales managers have to engage in a series of compromise sessions. Here, the sales targets and budgets might be adjusted by the higher management, reflecting both the needs of the corporation and the true potential of the marketplace.
  10. Budget approval – Final levels are eventually approved and authorised for both the sales and the selling expense budgets. Here, onwards budget are reviewed periodically looking at the ongoing market conditions and other external forces.



Tunde Oyeniran, a sales/marketing strategist, selling/sales management trainer and personal sales coach is the lead consultant, Ekini White Tulip Consulting Limited, Lagos.  We deliver training, recruitment and field force management solutions .Feedback. Channels 080-2960-6103 (SMS/WhatsApp) / or check out 




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