Setting sales targets

Your sales targets will grow with your business. Good sales planners set targets in areas that will drive business growth. For example, if the market is chasing compression gym clothing, they increase their targets for that range.

In setting sales targets you need to:

  • consider the profit margins each of your sales will achieve (there's little point reaching your sales target figure but shrinking your margin to achieve it)
  • be realistic — your targets must be supported by marketing plan information
  • keep all your business costs in mind and plan for growth.

Gross profit margin

Gross profit is the difference between sales and the cost of producing or purchasing products or providing services before subtracting operating expenses such as wages, rent, accounting fees, or electricity.

Gross profit margin is the percentage of each dollar that is profit. Knowing your gross profit margin helps you identify products making the most profit, so that you can focus your sales targets on them. While any profit is good profit, smart businesses concentrate on achieving higher sales targets for their more profitable items, rather than making 'broad' product sales with a thin margin.

Use our interactive calculator to work out your gross profit margin.

Break-even point

Your break-even point is the number of units of your products or services that you need to sell to cover fixed costs such as rent, electricity, insurance and wages.

You can determine your break-even point by itemising all of your known, fixed annual costs, and then working out the volume of sales (in units) required to cover those costs.

Use the following interactive calculator to help you work out your break-even point. Once you have read and understood the example, you can type the numbers that are relevant to your business into the calculator to see your break-even point (i.e. how many units of a product or service that you need to sell per year before you make any profit).

Step 1

Use this formula to calculate your contribution margin.

Contribution margin = sales price - variable costs

Step 2

Use this formula to calculate your break-even point.

Break-even point = fixed costs ÷ contribution margin

Minimum sales requirements

Minimum sales requirement is the point at which both your fixed costs and your profit goal are covered by your gross profit. You work this out by calculating how much of your products or services you need to sell to cover fixed costs, your salary and your desired profit.

Keep in mind your aim is to achieve a fair return on the funds you have invested in the business, in addition to your salary. Once you've calculated your break-even point, decide what you consider to be a reasonable return on investment (ROI) and a fair salary for the owner and/or manager of the business (i.e. you).

Use our interactive calculator to work out your minimum sales requirement.

Costs that could affect your profit

Consider all the related costs involved in achieving your minimum sales requirements. Marketing, production and supply costs can affect the amount of sales you need to make a profit.

Your marketing must be sufficient to generate your desired sales volume, and your production processes must be capable of delivering those sales.

Sales strategies

You must have sales strategies in place to meet your targets. There are a range of strategies you can use, including how you will:

  • keep existing customers (e.g. a customer rewards program)
  • attract new customers (e.g. marketing and advertising)
  • sell more to existing customers (e.g. up-sell).

A realistic sales target is often based on a solid marketing strategy.  You can help your sales staff achieve their targets by generating qualified leads and brand awareness from your marketing activities.

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