【正文】 choosing tactics that may in turn affect the budget. Examples of Goals, Options, and Budget ImpactsGoalOptionsBudget ImpactsBee the most reliable provider of Internet servicesMaintain stateoftheart equipmentRequires capital investmentTrain the most skilled repair teams in the fieldHigher labor and training costsProvide the most timely customer serviceIncreased spending on customer supportIncrease revenues by 10%Raise pricesLower sales volume, higher gross marginExpand marketingIncreased sales, higher marketing costs, increased production costsEnter into partnerships Increased revenues, higher production costs, higher selling costs171。 Previous |Next187。Setting assumptionsUnless we find some way to keep our sights on tomorrow, we cannot expect to be in touch with today. —Dean RuskAll budgeting requires making assumptions about the future. In many panies senior management will municate key assumptions that are to be used throughout the organization—such as a 5% increase in salaries, or a 10% increase in sales volumes. In other cases the assumptions are specific to an individual department39。s activities. Managers use a wide variety of data and approaches in developing assumptions, including historical trends, purchasing surveys, and industry projections. They also municate with each other about their expectations for customer response, supplier performance, financial market fluctuation, and so on. Be sure to document all of your assumptions and keep notes of sources of information you use.171。 Previous |Next187。Personal InsightsBeware of optimistic forecastsSee AlsoTips for setting assumptionsBudget preparation checklistPreparing an Operating Budget—Goals and AssumptionsSetting assumptionsBeware of optimistic forecastsPersonal InsightOne of the strangest things that I39。ve encountered in all the businesses I39。ve been in, and ever since I39。ve been in business, is that I can rarely remember anyone—whether it39。s in betting hotels, holiday camps, bingo or machine sales—ever bringing me a fiveyear forecast (which is what most people ask for) where business wasn39。t always better in the fifth year. What you normally get, which is quite infamous, is the wonderful hockey stick forecast, where perhaps business isn39。t wonderful now so the graph es down a bit. Then for the next four years it goes up, and the ending is always Y percentage higher than the beginning. First, one needs to understand why people do that. You39。re presenting something that might be your own job, your own idea, your own division, your own department or your own business to your boss or a mittee of bosses. Very few people want to sit in front of them saying: OK chaps, I39。m going to do much worse in five years than I am now. Can I have a raise? So, it39。s very important to remember that. The other thing is that people are natural optimists: really, most of us are. If you ask people Will the weather be better next month than it is this month?, nine out of ten people will tell you yes, because they want it to be—not because they necessarily believe it will be. And if you ask: will business be better next month or in five years39。 time? most people will say: yes。 not because they believe it will be but because they want it to be. It39。s just natural human emotion. Be aware that any forecast for the future will be optimistic。 and the further into the future the forecast, the more optimistic it will be. As forecasts can be enormously important, treat them with as much realism as possible because people are natural optimists and this is likely to be reflected in the numbers.David MichelsFormer Group Chief Executive, Hilton GroupIn 1981 David Michels joined Ladbroke Group as Sales and Marketing Director of Ladbroke Hotels. He then became Managing Director of Ladbrokes39。 Leisure Division in 1983, followed by Managing Director of Ladbroke Hotels in 1985.He spent 15 years with Grand Metropolitan, mainly in sales and marketing, which culminated in a Board position as Worldwide Marketing Director.Following Ladbroke Group39。s acquisition of Hilton International in 1987, David Michels became Hilton39。s Senior Vice President, Sales and Marketing. In 1989 he moved up to bee Deputy Chairman of Hilton UK, and Executive Vice President, Hilton International.He joined Stakis as Chief Executive in 1991. Eight years later the pany was acquired by Hilton Group for around 163。 billion.He joined Hilton International as Chief Executive in April 1999 and became Group Chief Executive of the Hilton Group (formerly Ladbroke Group) in June 2000. He left the pany in 2006.David Michels is also a Nonexecutive Director of British Land Company, easyJet and Marks amp。 Spencer.171。 Previous |Next187。Preparing an Operating Budget—Forecasting Sales and RevenuesUsing trends to predict salesCan current sales trends inform your forecasting?Key IdeaSales projections for a given period are developed by product or product group. If you are forecasting product sales, consider whether it is appropriate to base your forecasts on current sales trends. Some factors to consider, in addition to overall demand trends for these types of products, are: The history of sales growth for your pany39。s products Competitive products that have or may be introduced in the market Availability of substitute products Price sensitivity of purchasers Percentage of purchasers who demonstrate repeat purchases Planned changes in sales and promotion activities171。 Previous |Next187。Historical data and run ratesIf historical sales data is used as a base for forecasts, determine whether it is appropriate to use annual data or the run rate.The run rate is the extrapolation of current financial results out over a future period of time. For example, if December39。s sales are $75,000, the annual run rate ($75,000 multiplied by 12 months) is $900,000. Annual data may be most appropriate for forecast