As spring brings forth renewal, growth, and fertility, I am grateful for the sense of abundance and possibility in 2023. In life and in business, it is important to survey our road ahead and learn lessons from the path we have traveled.
As we now transition out of our first quarter of the year and into the second, take a moment to ask...
How did your quarter measure up against your expectations?
You may have a good idea - most business owners do. Except - you're keeping that information in your head - and you may be surprised that some things slip by. When we don't measure - on paper, on purpose, we let the dollars lead the activities. Instead, take charge of your cash flow by naming your goals and putting your money where your priorities are.
👆🏻 THIS is the most compelling reason to make a budget.
Now - maybe you're thinking that budgets are complicated, overwhelming, or boring.
But what if I gave you a few simple tips to make it a breeze? Here are some steps to actually make a business budget that works for you.
GATHER - First you'll need to run your Profit and Loss Statement (AKA Income Statement) for the most recent period. If you are budgeting for 2023, use 2022 as a starting point.
EXPORT - Export this report to Excel or Google Sheets
CONDENSE - Condense the line items into similar categories - like Sales, Payroll, Overhead, and Cost of Services.
ADJUST - Adjust the amounts in your expenditure column to reflect your monthly or yearly targets. Use formulas to take last year's numbers and increase or decrease by percentages. (IE: total * 1.1 to bump up by 10%)
PROJECT - This is the most subjective part of the process.
Remember to project price increases for products if you increase your sales targets. (% increases work well here for many cases as well)
You'll also want to target spending cuts
Build in a new hire or a project
Add any major purchases or repair projects on the horizon
Estimate your year-end tax burden and set some aside each month
BTW, Are you paying yourself?
Development of future programs (in other words, expect the unexpected)
You get the idea...
TOTAL - Total your categories and your grand total budget.
SEGMENT - Add columns for the periods you will be measuring and break out the totals by period. For example: To break a yearly budget down into quarters, add four columns and divide the totals by four to get your quarterly budget. This will give you an interim target to measure against. For seasonal cycles, the four quarters might not be equal. Be sure to adjust accordingly.
MEASURE - Use your new tool to measure your progress at regular intervals
ADJUST (Yes, Again) A budget is a living document. As the business changes, so must your budget. When you're working with your numbers regularly, you will become more aware of nuances, changes, and cycles and be ready to adapt.
REMEMBER - A budget is a TARGET on your MAP. It will never be exactly right, but if you don't have a destination, you will never arrive. Now let's get moving!
And, when you're looking for someone to ride shotgun on this road trip called business, I'll be your ride-or-die.
Getting my playlist ready right now,