Just finished loading Session 11 in my 12 month online mentoring programme and given we are at the start of the financial year, I just have to share the key tips. I did the seminar with Angela Meads, who used to be my General Manager in my advertising agency, Red Rocks. Angela pretty much ran the business and is one of the key factors behind my ultimately successful exit. You may remember in past blogs I’ve said one of the keys to success in business is hiring people who are better than you…. well Angela is a qualified accountant, who is brilliant with HR, all things legal, managing clients, managing staff and can also turn her hand with style to business strategy. So I’m delighted to report that 1. Angela is joining me as partner in my liber8yourbusiness business and 2. She has helped me put together a seminar on budgeting as without her I would have struggled.
So from Angela, here are the key tips to creating a budget that drives your business:
1. Start with your cumulative profit figure. This assumes that you are building a business ultimately to sell (my online mentoring programme teaches you how to do this) and that your sale price will be based on a multiple of a cumulative profit over a number of years. You will be building your profit figure towards this target.
2. Now look at the profit you think you need this year on your way to that cumulative profit figure.
3. Then look at your costs for the year… what will be your fixed expenses for the year, the known expenses you always have? (eg. rent).
4. The profit goal and expenses numbers will tell you how much income you need to generate to achieve target. Now divide your income target into a) known income, the income you are confident you will get from existing clients and b) new business… the difference between your known income and the income required to meet profit.
5. Spread your income, costs and profit targets across 12 months, taking into account any seasonality highs and lows you know of from past years (eg. with Pet Angels, we know we always peak around school holiday times so we allow for increased income and associated costs around these periods).
6. Write down your assumptions for the key figures
7. Review your budget to be sure you believe your balancing figure is achievable. Can you really achieve those sales targets? DON’T LIE TO YOURSELF! Can you really achieve your cumulative profit in the timeframe set for your long term goal? If not, maybe you need to review the timeframe for your exit and take a bit longer to get there.
8. Your budget is a living document. Each month you need to put your actuals next to your budgeting amounts – for sales, costs and profit. This will tell you how you are tracking month on month. If you are over achieving you can re-set your annual results upwards. If you are underachieving, what can you go to get on track?
Using a budget as your primary planning tool is the most powerful way to run a truly successful business. If you’d like me to email you Angela’s template, flick me a note at firstname.lastname@example.org