What Is a Turnover Percentage?

The sales percentage method is one way to determine your advertising budget. The budget that means advertising can be determined based on the percentage of the product's sales on the market in the previous year. For example, the sales of a product in the market last year was 200,000 yuan, and companies in the industry generally used 2% of sales as advertising costs, so the product's advertising costs for the current year were 200,000 yuan × 2% = 4000 yuan. The calculation of the sales percentage method is simple and straightforward, but because the market conditions are constantly changing; and the level of product sales does not necessarily depend entirely on the role of advertising. Therefore, rigidly linking advertising costs to product sales sometimes does not match the market reality. ^[1]

Sales percentage method

Right!

The sales percentage method is one way to determine your advertising budget. The budget that means advertising can be determined based on the percentage of the product's sales on the market in the previous year. For example, the sales of a product in the market last year was 200,000 yuan, and companies in the industry generally used 2% of sales as advertising costs, so the product's advertising costs for the current year were 200,000 yuan × 2% = 4000 yuan. The calculation of the sales percentage method is simple and straightforward, but because the market conditions are constantly changing; and the level of product sales does not necessarily depend entirely on the role of advertising. Therefore, rigidly linking advertising costs to product sales sometimes does not match the market reality. ^[1]

Also known as the percentage of sales method, a method of estimating the loss of bad debts by a certain percentage of the total sales.

In the case of using the sales percentage method, the estimated percentage of bad debt losses may not be suitable due to the continuous changes in the operating conditions of the enterprise market. Therefore, it is necessary to constantly check whether the percentage can adequately reflect the actual situation of corporate bad debt losses. In the case of high or low, the percentage should be adjusted in time.