The second step in forming the sales budget is to estimate the price that you will be able to charge per unit of your product or for the services you provide. This step can be a little tricky because there are many factors that can affect the price you can charge your customers.
As with the units to be sold budget, I recommend that you determine the highest and the lowest price you think your customers will be willing to pay for your product or service during the budget period. You can then estimate the most likely price your customers would be willing to pay.
When you multiply the estimated units to be sold by the estimated price per unit, you get the gross sales revenue budget.
I have one word of caution regarding the sales budget. It is tempting to try to back your way into your sales revenue budget. This begins by determining the profit you want to make, next determining the total expenses for the period, and then manipulating your sales prices and sales mix (the percentage of total sales for each type of product you sell) in order to confirm the profit you want to make. This practice results in a budget that looks good on paper, but will not reflect a true estimate of the sales your company expects to make. This practice may also prevent your budget from being a useful business tool because you skipped the important step of analyzing and forecasting independently the units you estimate you can sell and the price you can sell those units for.
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