Questions My Business Owner Clients Are Asking Me: Budgeting

“Why do I have to budget? I have no idea what next year will look like!”

No one does! That’s WHY you should budget!

Budgeting for next year should be done once you have closed your Q3 books. This usually starts in October and will hopefully be completed by the end of November so as not to interfere with year-end sales and parties.

To budget successfully, you should take the following steps:

  1. You must look back and reflect on the past year. What was successful? What were your challenges? What brilliant decisions did you make? Which decisions should have been thought through more completely? What results are you proud of? What could have been better? What should you do differently in the future?
  2. Now you have a guide for next year… What revenue goals are you going to set? How are you going to achieve them? Growth is only accomplished by selling more products or services to existing clients or by attracting new clients. Which strategy will work best for you? And what are you going to do to make this happen? Do you need to hire? Retrain? Find more resources? Given the resources available, what will be your priorities? What do you want to accomplish?
  3. Then put your thoughts into numbers! Start with year-end goals and then break your year into quarters and months. Match variable costs to revenue growth. The increase fixed costs by at least 5% (with inflation it might be 10% but 5% has been a good “cost of living increase over the past 20 years). Finally, what resources do you need? Will you draw on your line of credit? If so, include additional expenses due to increased interest rates. What is your ROI? Does it support these increases? If so, budget done. If not, back to the drawing board to fine tune some numbers. Rinse and repeat!
  4. Finally, complete a SWOT analysis. Are you playing into your Strengths and managing your Weaknesses? What Opportunities do you see if the economy spirals downward? Upward? What Threats are waiting in the wings that you worry about? How can you mitigate these?

Budgeting isn’t just about the numbers… It’s a comprehensive review of where you’ve been and where you’re going. Get you management team together and brainstorm. This should be a FUN exercise – planning the future and setting yourself up for success! Let me know if you want help. I’m happy to discuss or facilitate.

Contact me and book a time or consider joining a BOMBA Mastermind where you will learn all the systems to scaling your business profitably and successfully.