It’s so easy to get bogged down in the ‘doing’ and daily running of the business that the bigger picture is often forgotten.
The start of a new financial year is a perfect opportunity to review how your business performed last year and put in place a budget and cashflow forecast to set you up for success in the coming financial year – another step for your business becoming more sophisticated.
The timing is perfect because the new financial year gives you a great starting point. Working on the business budget can be your catalyst for thinking through your strategic business plan and getting clear on what you are aiming to achieve in the next 12 months.
Key elements for strategic budgeting include:
- What are the capital requirements the business might need? Are there any big expenditure items or replacements needed?
- Do we want to grow or stay where we are?
- What sales targets do we need to hit to get our expected revenue? How should we break these down across inventory lines or services?
- How much is it costing to run the business? Will it cost more to get the projected growth? Are there areas where we can save?
- Do we need to/can we afford to put on new staff? What could this do for our sales targets?
This process will help highlight the actions needed to reach your short-term and long-term goals.
Having worked through the budgeting and forecasting process with different businesses over the years, my key tips are:
- Review the past but don’t get stuck on it; just keep it in the background as an understanding of what happened.
- Break down your targets, ideas and growth projections and take a realistic view on how and when this applies to the budget.
- Figure out the minimum sales or revenue you will need just to break even (pay the bills and keep the doors open); then build scenarios from there.
- Always tie your strategic plan in with your budget.
- Remember to include any of the business commitments, such as paying bonuses, investing in new marketing collateral or a website update, capital requirements, that are easily forgotten because they are second nature.
- Have fun with it! Don’t make it a chore, otherwise it will feel boring and painful every year from now on. Think ‘what if’ and get excited exploring the possibilities.
- Consider how the strategic plans and budgets fit into your personal life.
Set a deadline for the end of July for completing the process. If you don’t do it now, it will become another long-gone idea on your list of things to do and before you know it, you’ll be gazing back wondering where the year went.
“If you don’t know where you are going, you’ll end up someplace else.” – Yogi Berra
When you’re ready to take the leap and get stuck into setting your business budget, email me at firstname.lastname@example.org.