Step Back and Take a Look at your Business
We spend a great deal of time discussing the importance of creating a personal budget. Knowing exactly where every dollar should go is the first step toward real personal financial freedom. Although many people view a budget as something that is “constraining”, it is truly a tool that can provide you with tremendous flexibility.
We seldom discuss or get into deep conversations about creating a BUSINESS budget. When you step back and take a look at your business expenses, in most cases, you will discover that money is being spent needlessly and money is starting to slip through your fingers – very similar to a personal budget! The difficult part of creating a business budget is that no two businesses are the same and it is hard to find a basic system.
When you step back and create a business working budget, you will stop some unnecessary spending that is now keeping you from growing at the rate that you should be growing! Make sense? It may sound more difficult than it really is so here are some basic things to look for and some steps that you can take to get a handle on this monster.
Your very first step is to determine where you are earning your revenue. That may sound simple but REALLY look at your sources and use your history to establish an estimate for the new year. Do you have customers that will be using your services more frequently or others that you know may be cutting back? This is a wonderful time to ask them and find out how you can serve them better and, quite possibly, increase the likelihood that your revenues will increase.
Secondly, look at all the expenses that you know you will have in the new year. These are generally referred to as “fixed costs” but these are the ones that are set – maybe rent, some utilities and regular payments. Again, use your historical data and financial statements to help you determine these numbers.
Next, you should look at all the expenses that fluctuate frequently. These are going to be much more difficult to calculate but this is where your budget will get refined and where you will “find” money that is slipping out of your hands. Dig into these categories and see what you can do to tighten this up and avoid unnecessary expenses. It might sound basic but, your revenue minus your expenses will equal your profit. Increasing your revenue or reducing your expenses will create a bigger number at the bottom of that simple equation! That means more money in your pocket.
One Time Expenses
The last step is to really look and determine any other “one time” expenses. These are the ones that jump up and bite you when you least expect it. Plan for them. Include money in your budget for those “unexpected” items. They happen every year so PLAN for them. Again, knowing that you have money budgeted for these things will provide you with a tremendous sense of freedom. If they don’t happen, it will create “found” money within your plan.
Now, take some time and do it! You know that you should, but it seems like such a hassle – right? If this is something that you have been thinking about for a long time but have never taken the time to put one together, give us a call and schedule an appointment. We are experts at it and will be happy to offer you some basic direction and advice. It is what we do at Hollander & Associates.