How to Budget for Success
Let’s talk about money.
I know our parents said never to bring up religion, politics, or money, but lucky for us this isn’t a dinner party. This is our business we’re talking about, and like it or not money is a big factor.
When you think about money and your business, do you feel comfortable? Chances are no matter who you talk to, everyone’s a little squeamish when it comes to money talk. But why is that?
When it comes to money, a lot of us treat it like our weight.
We kind of know our numbers. But after the holidays and winter months of pastas and comfort foods, we tend to avoid the scale. The same goes for our business after a particularly challenging month we may avoid the envelopes.
We have to fight the urge to be coy with our finances.
We need to be bold and informed. Every month we will have costs in running our business that are unavoidable. The same goes for all the surprise expenses we will face.
Your business needs a solid finance map.
Think of your destination being your target figures. These figures can be sales, target profits, or labor costs. Basically any number you need to keep in range so your business can operate comfortably.
Mapping our finances is a form of budgeting.
Sure, the word “budget” is kind of like the word “diet.” It implies cutting things out, denying yourself, or being restricted in what you can do.
Let’s change that.
Stop thinking of a budget as the thing that tells you can’t spend money.
Instead think of your budget as your plan for making and spending money. Yes, you should budget your sales just like you budget your costs.
Start by writing down the amount of sales you plan to make each month. Maybe you know because you have contracts extending into the future. Maybe you don’t know, but you have an idea of what a “typical” March looks like. Or you have an idea what your sales goal for the month will be.
Once that’s done, move on to your monthly costs.
Write out everything that you spend in a month. Think of any costs your business requires, from office supplies to subscription services.
First, notice if the costs add up to more or less than the planned sales for the month. If they add up to less, congratulations, you’re planning to make a profit. If they’re more, you’ve got some work to do cutting costs, increasing sales, or both.
Either way, give your costs a good once over.
Take a moment to look at all your costs and think about each of them individually.
Note each of their pros and cons and how they enhance your business. To borrow some philosophy from Marie Kondo, famous de-clutter expert, do these costs “spark joy” for your business in the now or long run? And when we say “spark joy”, we mean do they deliver an acceptable return on your investment?
For example, if you’re spending X amount of money a month on a website service that allows you to maintain an online presence and reach customers electronically, but also spend Z on paper newsletters, you should know which correspondence type “sparks the most joy” for your business.
Are you spending money to make money?
You have to be able to justify your spending with tangible profits or benefits. No spending should be done without reward or recoupment. Be brutal when comparing your costs and be willing to cut anything that’s not performing for you.
So how do we know if our money map is getting us to the right places?
Think of any areas where there are wasted resources. Do we keep paying for one-off freelance jobs? Price it out. It may be more cost-effective to have someone on-staff.
We should also make sure our business is not being fed on by any money-leeches, or things that are sucking little bits of money from our business without providing any benefits.
These little money parasites often go unnoticed because they're just taking a little bit of money at a time. Do be warned; the little bit money leeches take add up to big costs over time! So comb over your business carefully to avoid these types of costs. Hint: look at all your auto-renewing services!
At the end of the day, you need to be informed of all the ways your business spends and makes money.
In all of this, remember that managing the numbers is important, but the numbers are just a scorecard. So use them that way. At the end of each month, take a look at the actual results and compare that to the budget plan you created.
The magic is in seeing where reality didn’t line up with expectation and digging into the business to understand why. When you learn to make this connection between what the reports say and what’s actually happening in the business, you’ll have a powerful tool to stay on track to your goals.
Want to learn more ways to be in control of your business’s performance. Reach out for a free consultation to learn how your business can spark joy in your life.
If you are having trouble knowing exactly where your business should be going or what you need to make your journey successful, we can help!
Book a free 1-hour Breakthrough Consultation with us.