One of the first questions I ask a business person who wants to work with me is… ‘do you use an annual budget?’ Would it suprise you if I say the answer is nearly always ‘no’?
Most small business owner operators do not manage their business by the numbers. Which is CRAZY!!
I know, I used to be one of them (a budget athiest). This was many moons ago, before a wise person taught me the power of the budget. Now I realise you simply can’t be successful in business without one. Hallelujah!
So … Your budget is the map of your business, it sets the targets and the parameters within which you have to work. If you do a good budget and create a plan to achieve it year on year, you will grow a business with direction and discipline. If you don’t… you’ll be in danger of spending too much money and too much time on things that don’t really matter, and too little money and too little time on the things that do.
So believe me when I say in my most Shakespearean tone … Get Thee A Budget Forthwith!
There is an entire seminar in the liber8yourbusiness programme to walk you though the best way to do this, and how to link it in to your long term goals.
But here are the 7 key steps:
- Decide what profit you want/need to make this year. (Wait for my next blog on why profit is the only number that counts at the end of the day).
- Then put in your expenses for the year, using last year’s expenses plus some extra for growth.
- This will tell you what your Gross Profit needs to be (Gross Profit minus expenses = profit).
- The put in your cost of sales based on last year’s margin (Sales minus cost of sales = Gross Profit. The margin is the % difference).
- This will tell you what your sales income needs to be to meet profit targets.
- Then spread all the numbers out across the 12 months, allowing for a ramp up across the year as your sales and marketing plans kick in.
- This is your budget. Beside each budgeted figure each month there should be an ‘actual’ column. This is where you put in what actually happens each month so you can see how you are tracking against budget.
Of course you need an awesome plan to achieve your targets each month. That’s the game… set the targets, plan the attack and achieve them.
If you want to know more on how to do this and all the planning you need to achieve targets.. email me at laura@liber8yourbusiness.com for more information about one of my programmes. Getting wise will most defintely accelerate your path to getting a viable, saleable and valuable business.
From the desk of liber8yourbusiness. Business mentors and experts in small business exit strategies.
