#Business#Budget

The Annual Budget with its Commercial Strategy (or Business Strategy) is the guiding document throughout the year for the Commercial Management.

How complicated is a Business Budget?

It will depend very much on the defined strategy, the type and size of the company and how they want to run it. A company determined to pursue a Differential Strategy for Leadership in Costs and oriented to a Generalist Market will not have the same structure and the same commercial organization as a company that has decided to pursue a Differential Strategy for Technology and Market Niches.

Therefore, if Strategies, General and Business Organization Structure are different, it is more likely that the typology of the annual budget is also different, which will affect that the Commercial Budget has a different qualitative content.

The company can work with a matrix structure because has several dimensions as for example:

1.) Sales of Products by Division

2.) Sales of Products by Markets and /or Industries

3.) Sales of Products by Regions, Countries, Autonomous Communities, Sales Engineers

4.) Sales of Products by Direct Customers / by OEM Customers / by Distribution

If you also want to apply “product mix" policies then we can find a large number of combinations that must be reflected in the budget if the company determines to manage based on these concepts. Therefore, the Annual Budget can be as complicated or as simple as the company determines. In my view a person should not have more than four or five parameters to be controlled that means with a very detailed budget we only will use more hours than necessary in its execution, unnecessary controls and loss of effectiveness. This alienates us from the selling machine concept we are trying to find.

The budget with the necessary and sufficient detail should be implemented for execution. It is time to implement what we have planned and agreed with General Management. Previously Sales Engineers have agreed with the Commercial Management all aspects that make up the annual budget based on customer per customer. Yes indeed you have to make a budget per customer! The budget per customer is the basis of the Budget "Bottom up".

For the above example we will make a Customer / Market or Industries and a Customer / Products Division budget. Depending on the size of the client we will also make a Client / Autonomous Community / Country / Global budget. So, we can observe that as the company has more than one dimension the budget and management are more complicated as consequence of the difficulties to follow what the market proposes.

Precisely this is why we should greatly focus the action of Sales Engineers. At least in the industrial world I know a Sales Engineer cannot effectively deal with more than 100 customers. This will be a first magnitude that we must consider.

With this magnitude and knowing the number of potential customers we have in our area of influence we can make an effective planning of the number of people needed. This preliminary analysis will be incorporated in the Corporate Strategy, Medium Term Planning (five years) and Annual Budget including the Forecast (second year).

We are putting the first pillar to launch a selling machine! We have a long way to go!