The sales and marketing cost model is used to estimate in detail and then summarize the sales and marketing expense for inclusion in the income statement of the financial projections template.
The costs form an important part of the financial projections operating expenses, and are more fully discussed in our sales and marketing expense post.
Sales and marketing costs can be found in all businesses, and are those costs associated with acquiring, selling to, and supporting customers throughout the customer life cycle. They are in effect the cost of implementing the sales and marketing strategy of the business.
The type of costs to be included vary from business to business, and decisions need to be made at an early stage which costs to include. For example, one business might choose to include technical support costs under the heading of sales and marketing whereas another might include these under the heading of cost of sales. The important point is to be consistent, and the purpose of this sales and marketing cost model is to help you accumulate the relevant costs in detail and summarize then ready for inclusion in the financial projections template.
Using the Sales and Marketing Cost Model
The sales and marketing cost model which is available for download below, is used as follows:
Enter the Staff Position
Enter the title for the staff position. The model should only include staff engaged in sales and marketing activities for the business.
Enter the Start and End Month
For each staff position, enter the start month and the end month. The calculation of the staff cost assumes that the staff member starts on the first day of a month and ends on the last day of a month. So for example, is the start month entered is 1 and the end month is 18, then the model will show a total of 18 months of cost, split 12 months shown in year 1 and 6 months shown in year 2.
Enter the Staff Cost
Enter the annual year 1 staff cost for each position. This would normally be the gross salary for an employee.
Enter the On-costs Percentage
On-costs allow for all the additional costs of a staff member such as employer taxes, health care, life assurance, pensions etc. Enter a percentage which reflects the level of on-costs for the business. The percentage is applied to the staff cost before on-costs.
Enter Staff Cost Annual Inflation Rates
Enter the expected annual staff cost inflation rate for years 2 to 4. The percentage is applied to the previous years staff cost.
Once entered, the sales and marketing cost model works out the total staff costs for each year taking into account the start and end months, base year one staff cost, and the on-cost percentage and inflation rates. The staff headcount is also calculated based on the number of position line items in use at the end of each year.
Enter Other costs
To complete the sales and marketing cost model enter a description and amount for each of the 5 years for each line item to be included under sales and marketing. It should be noted that these amounts are entered manually and are not adjusted by the inflation rates previously entered, which apply only to the staff costs calculation.
Finally, the model calculates the total costs for each of the 5 years. The amounts calculated should now be included under the heading of sales and marketing on the income statement of the financial projections template.
Sales and Marketing Cost Model Download
Our sales and marketing cost model is available for download in Excel format by following the link below.
Users use this sales and marketing cost model at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a sales and marketing cost model that you might use when preparing financial models in Excel. It is purely illustrative of a business plan financial model. This is not intended to reflect general standards or targets for any particular company or sector. If you do spot a mistake in this sales & marketing operational model, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.