For many, the word ‘budget’ is about as appealing as the word ‘diet’. It seems to imply what you will go without, rather than what you will achieve.
To a successful business owner, however, the word ‘budget’ has a very different meaning.
A budget is more like a roadmap that clearly outlines where you intend to take your business and provides a clear indication of the steps you need to achieve to get there.
Successful business owners not only set clear targets and budgets each year, but they also monitor them closely on a regular basis and adjust them as they progress throughout the year.
Here are 2 compelling reasons your business needs a budget, now:
ONE – If you don’t know where you’re going, you can’t complain about where you end up!
Unless you set clear goals for where you want to take your business, it’s likely to just meander along, subject to the whims and vagaries of the economy and general market conditions.
The first step in charting a clear course for growth and development within your business is to ask yourself where you want to be in 12 months. Next, you need to objectively measure where your business is at right now, which also means having clear up-to-date accounts.
A factual look at the numbers that describe where your business is right now, takes away all the subjectivity, opinions, and ‘reasons’ (often excuses, disguised as reasons), revealing a true indication of your business performance and potential for growth.
These factual numbers are the sales, variable costs, margins, overheads, and profit.
Understanding these numbers allows you to answer the following questions, which all business owners should be able to answer:
- How much money have you made?
- Where has the cash gone?
- How should I set my prices?
- Can I make enough to live off?
Congratulations! This is the first step to ensuring success for your business.
TWO – Budgeting is not about accounting; It’s about being accountable.
The key to creating a budget is to ensure you don’t ‘set and forget’ – It’s important to regularly review your performance against your budget to understand why you did or did not meet your targets.
Understanding how to achieve your targets is about going beyond the numbers to understand how they are formed.
What are the underlying causes of those numbers? Sales and costs are a result of underlying factors known as the ‘drivers’ of your business.
Drivers contributing to a sales figure could include:
- the number of calls received
- the number of visits to your website
- the percentage of conversions of enquiries or walk-ins to sales, the dollar value of the average transaction, or simply
- where your marketing is targeted.
Your sales figures are simply a result of these drivers, and costs are no different.
Once you are clear on the handful of drivers that lead your business’ results, the next question is… “What are you going to do about it?”.
Your budget won’t just give you a monthly sales target, rather, it will help you quantify the drivers that produce results.
Knowing these drivers and quantifying a target for each, allows you to set targets for you and your staff in order to achieve your business goals. Once you’ve set your targets you can then decide whether you need to implement any additional processes or training to help achieve those targets.
Creating a budget for your business provides valuable insight into your business’ performance and holds you accountable to measurable indicators.
If you would like assistance with creating a budget for your business, our highly skilled team of experts will be happy to guide you on your path to success – please reach out to us by calling 1300 707 766 or emailing email@example.com.