It takes money to make money. But blindly spending doesn’t guarantee any kind of return on investment.

Blowing your entire sales budget without a plan? That’s not a great way to turn a profit.

Strategically creating (and sticking to) a budget based on historical data, sales forecasts, and benchmarks? Now that’s a smart investment.

A well-planned sales budget can lead to increased sales and revenue—which can then be reinvested into all aspects of the business (including the most lucrative sales activities).

Whether you’re looking to expand your sales team, optimize your cash flow, or make the most out of your existing budget, it really does pay to create a well-defined sales budget.

Not sure how to set your company’s sales budget? This article will help you work out the best way to set a budget for your sales team.

What is a Sales Budget?

At its core, a sales budget is simply a financial planning tool. Sales budgeting involves forecasting expenses and expected sales over a given period, as well as allocating the necessary funds for sales activities and tools.

Sales managers and business owners use sales budgets to predict costs, forecast revenue, and ensure their sales reps have access to the resources they need.  A company’s sales budget outlines how much can be spent over a given period on everything from salaries and commission to software subscriptions, tools, and professional development.

Why Your Team Needs a Sales Budget

Knowing how to set a sales budget (and execute it accurately) is a crucial aspect of resource management for any business. Especially because setting a strategic sales budget can lead to increased sales and revenue—some of which can then be reinvested into all the business (including the most lucrative sales activities).

Sales Budgeting Isn’t Just About Cutting Costs

If you’re wondering how to set a sales budget, one of your biggest concerns is likely keeping costs in check—and rightfully so! Optimizing expenditure can play a huge part in setting a sales budget.

But creating a sales budget isn’t just about deciding how much you plan to spend. Your sales expense budget also determines how and where your resources can best be allocated.

strategic sales budget

Today’s Sales Budget is an Investment in Future Sales

Setting a sales budget helps create a plan for how your resources can best be utilized. This helps ensure your team has the resources needed to successfully make sales and grow your company—without spending more than your business can afford in its current state.

A good sales budget can improve your cash flow by:

  • Using recent sales data and KPIs to predict sales volume for the upcoming period.
  • Helping set fair selling prices for both existing and new products.
  • Minimizing spending on sales activities with the lowest ROI.
  • Reinvesting in your sales team to promote growth and achieve goals (i.e., by leveling-up skills, hiring more reps, and providing access to the best tools and resources).

4 Different Approaches to Creating a Sales Budget

There are a few different ways to approach setting up a sales budget. While some company’s set a fixed budget for the entire sales department, others choose to divvy up resources more precisely—perhaps assigning portions of the budget to specific line items, inside sales vs. outside sales, or tying available budget directly to results.

What method makes the most sense for your company depends on several factors, including the size of your business, your current sales, growth rate, cash flow, and current market trends and economic conditions.

Below are some of the most common ways to approach setting a sales budget.

Different Approaches to Creating a Sales Budget
  • Revenue Percentage: Some businesses choose to invest a set percentage of past sales back into the sales team for the next budget period. For example, you might allocate anywhere from 5-20% of revenue from the past quarter into your sales ops. This method rewards sales teams for high sales periods, ensures available funds are continually reinvested into the sales team, and reduces spending following a period of lower sales.
  • Team Size: One of the simplest ways to budget for your sales team is to calculate your cost per sales rep (including salary, bonuses, tools, training, and travel) and multiply it by the number of people on your team. A budget based on headcount reflects any new hires and employee turnover, making it one of the easiest ways to predict costs and ensure your sales department has enough funding to support the team’s needs.
  • Goal-Based Budgeting: Companies that engage in goal-based budgeting set budgets based on their forecasted sales and how much they want to sell in a given period. This tends to be a bit riskier but can pay off for high-growth businesses and startups.
  • Sales Forecasting: Your budget should always involve some element of historical data, but this is only possible for businesses that have been around long enough to experience seasonal fluctuations. Basing a budget on historical sales could look like bumping up spending during a typically-high-sales month and cutting back on costs in the lead-up to a seasonal slump.

Tips for Setting a Strategic Sales Budget Tied to Real-World Outcomes

Here are a few ways for sales managers and business owners to set an accurate sales budget based on practical outcomes and real-world data.

Review Your Sales Data

Historical sales data make an excellent starting point for your budget. If you’ve been in business for a while now and are looking to restructure or define your sales budget, you likely have access to valuable data on your spending habits, unit sales, and total revenue.

Review how much your sales department has spent on various activities, salaries, and tools in previous years to get a sense of how much you may need to allocate going forward. Plus, how much revenue can you expect over a given period?

Set SMART Goals

Setting clear objectives and SMART sales targets can help you make the most of your sales budget. Defining your goals from the start helps decide how your budget should be allocated, what a realistic outcome is given the budget amount, and helps with forecasting ROI.

  • Specific: The most specific your sales targets, the more precisely you can tailor your sales budget to help you meet them.
  • Measurable: Whether your sales goals are defined by moving X number of units, increasing sales volume by Y%, or landing 5 new deals of a specific dollar value, it’s important to outline how you are measuring your results.
  • Achievable: Setting lofty sales targets might seem like a great way to motivate your sales team—until your team realizes those numbers are impossible to achieve. The best sales objectives are ambitious-yet-attainable.
  • Relevant: Focus your sales budget and forecast on items directly related to sales. For instance, if your sales department operates independently of your marketing team, it wouldn’t be helpful to tie your sales budget to marketing outcomes.
  • Time-bound: Define your budget period. Whether you’re planning for the next month, quarter, or fiscal year, your sales budget must be tied to a specific period of time.

Perform a Needs Assessment

You already perform a needs assessment to help qualify leads, but what about assessing your sales department’s needs?

Your sales budget should factor in everything your sales team needs to do their job effectively. This might include a competitive salary and commission, opportunities to attend training and networking events, tools to improve lead quality, easier access to customer data, or even marketing campaigns that drive inbound leads.

After all, it’s one thing to set a specific, measurable, achievable goal for your sales team—but it’s another altogether to ensure your reps have access to whatever they need to pull it off.

Build in a Margin of Error

Save yourself the headache of cutting it just a little bit too close by building in a set margin of error into your budget. Make this a habit to avoid going over budget and ease the stress of sticking to a budget by building in some wiggle room.

Re-Evaluate Often

Another way to keep your sales spending and forecasting on track? By monitoring your results and scheduling times to review exactly how your budget is translating into sales revenue.

  • Look into which activities have the greatest ROI and consider how you can invest more heavily into them.
  • If your sales team is struggling to close deals, find the root of the issue and base your budget around solving that so you can move towards a positive cash flow.
  • Find ways to replicate successes by pinpointing what your top sales rep does differently—and how you can potentially enable the rest of your team to follow suit.

Whether you’re creating a monthly or quarterly sales budget, you should re-evaluate at regular intervals—as well as any time major changes occur within your business structure, cash flow, or industry.

Invest in High-Value Sales Tools

As your sales volume scales and your client list grows, having access to the right technology is key to maintaining your upward trajectory.

Investing in high-value sales tools helps ensure you’re able to get a healthy return on all the time your salespeople spend prospecting and building connections.

As a business owner or sales manager, you need to invest in sales enablement tools and technology that empowers your sales team to do their best possible work. 

set a sales budget based on real world data

Some of the most popular types of tools among modern sales teams include:

Prospecting Tools to Produce Leads

One of the best ways to increase your ROI is to improve your lead gen process with a prospecting tool. For example, with a Chrome extension like Datanyze, you can find contact information for qualified leads while you browse LinkedIn.

The faster you can connect with high-quality leads, the more prospects you’ll have in your sales funnel and the greater your sales velocity will be—both of which are factors tied to higher close rates.

Customer Relationship Management (CRM)

Sales teams can use CRM tools for keeping track of details, contact information, and conversations with prospects and customers. The more deals you have on the go, the more important it becomes to have a reliable CRM tool—especially once you’ve outgrown the lead-tracking excel sheet.

Sales Intelligence Tools

Modern sales intelligence tools and software allow sales teams to gain a better understanding of customer needs, wants, habits, and buying patterns. Depending on the type of insights gathered, you can use sales intelligence to improve your targeting, refine your outreach efforts, and increase conversions.

Sales and Marketing Automation

With more prospects comes more data—along with a greater need for automation to help manage it all. Using sales automation tools can free up your sales reps to focus on selling and closing, instead of wrapping them up in administrative tasks.

Sales Analytics and Reporting

A huge part of optimizing your sales budget is understanding which aspects of your sales ops are working and which you might need to rethink or pause. A sales analytics tool can help you improve your strategy going forward by highlighting the most lucrative sales activities and channels vs. those with lower returns.

Do More with Your Sales Budget with Datanyze

Remember, it takes money to make money. Your sales budget should be built around providing resources to your team, motivating them through financial incentives, and investing in the best sales tools to grow your business.

Having the right tools available to you can make a huge difference in your sales team’s effectiveness and overall ROI—allowing you to get more bang for your buck, no matter your budget.

Why should you include a Datanyze subscription in your sales budget? Not only is Datanyze a reliable prospecting tool for sales teams of every size, but it’s an affordable solution that scales alongside your business.

When you search for prospects on LinkedIn, Datanyze makes it easy to grab contact info, so you can make the right connections at the right times. By providing you with accurate prospecting data at scale, Datanyze allows your sales team to do more within your budget, so you can grow your business (instead of your budget).

Sign up for Datanyze today and streamline your lead generation efforts—without going over your sales budget.