The amount of effort you put into the sales budget, will directly determine the amount of effort that you will need to put into the production/service budget. So hopefully you were thorough and detailed in your analysis of revenue projections.
After sales are budgeted, the production/service budget can be determined. The number of units to be serviced to meet the budgeted sales is set forth in the production/service budget. In general budgeting terms, most companies would call this the production budget. However, for our industry, it is simply the service budget, and it is comprised of the number or expected jobs, in each category of your business, and at what size and price points you expect to complete in order to meet your sales budget numbers.
In the simplest terms, think about it like this.
ABC Carpet Cleaning budgeted for January revenue of $10,000.00.
$6000 of that will come from residential jobs, and $4000 is budgeted to come from commercial jobs.
The service budget will then look at how many jobs it will take to fill each of those levels. As we stated before, in the sales budget, if you took your base level down to square feet, this will be much easier. If your current price per square footage on residential carpet cleaning is $0.25/sq ft., you will need to clean 24,000 sq ft. of residential carpet. If your commercial rate averages $0.18/sq ft., you will need to clean approximately 22,222 sq ft of carpet. These numbers are just estimates, not what we recommend.
From here, you have several options.
You can a) choose to leave your projections in square feet, or b) you can attempt to calculate the number of jobs this translates to, which can be used for variance analysis and reporting at a later date or for better understand of what 24,000 sq ft actually means to your business in a relative basis.
If you have contracted commercial clients, you can probably determine exactly which jobs make up your current square footage, if any additional jobs will be needed to reach your target sq. footage, and what your average square footage per job is.
On the residential side, if you are tracking each job the way you should, you will probably know the average square footage of your residential jobs. We suggest using this number. Take your average square footage and divide it into your target. I.e. 24000 / 500 = 48. In essence we are estimating that it will take 48 residential carpet cleaning jobs to hit your target of 24000 square feet and $6000 of residential carpet cleaning.
While this may seem like a simple concept, it is a crucial step in the budgeting process as it will drive our direct cost budget in the next section.
