Useful Budgets
How can you create a budget that will help you grow & develop your business? Even though a budget is just an estimate, a budget makes you sit down to think about your business and make key decisions.
Three of the most common emotional barriers are uncertainty, doubt, and boredom. Uncertainty about the future can make it hard to outline a budget. Regarding doubt, some are concerned that they aren’t qualified to prepare a budget. Lastly, a budget can seem boring or a waste of time.
Key Decisions When Budgeting
The hardest part of budgeting is making key decisions.
Revenue
- Should the business expand its product inventory or service offering?
- What is the pricing strategy? Are discounts offered?
- What are the sales or distribution channels? Should new ones be added?
Direct Expenses
- Can product costs be lowered?
- Are the right suppliers being used?
Sales Expenses
- What are the marketing plans?
- What are the advertising plans?
- What is your sales strategy?
Administration Expenses
- What subscriptions will you renew vs discontinue?
- Do you want to invest in software?
- What are your plans for internet, phone, etc.?
Personnel Expenses
- How many employees will you have? What are their salaries?
- Will you hire more staff?
- What training and development are necessary?
Capacity Expenses
- What are your office expenses?
- Do you have work cars?
The above questions are just a few examples of decisions that you may need to make when determining a budget.
Five Steps to Create a Budget
When it comes to making a budget, there are 5 key decision-making steps:
- Chart of Accounts: Outline the various revenues and expenses.
- Budget Modeling: Use a spreadsheet to outline a list of accounts that you want to budget for.
- Budget Estimates: Once you have a spreadsheet outlining the expenses, it is time to assign costs to each expense. During this phase, you may find it helpful to create a first draft based on historical numbers and then make revisions to improve the accuracy on the second draft
- Budget Qualification: Consider various scenarios and test assumptions to analyze and prove the budget.
- External Review: Recruit a third party to review the budget. A board member, accountant, or fellow entrepreneur can provide valuable input.
Increase Confidence
When a budget can be compared to reports, it becomes more useful. Throughout the year, you can compare your budget to your profit and loss to see how you are doing. Comparing the budget to actuals every quarter, twice a year, or once a year can help build & improve your financial institution as an entrepreneur..
Getting Started with GrowthWheel
If you need help preparing, the first step is connecting with a GrowthWheel Advisor. Mark Johnson, the Executive Director of the Technology Innovation Center, is a Certified GrowthWheel® Business Advisor.
Once you have connected with an advisor, he/she will send you a 360 screening. After completing the screening, your GrowthWheel Advisor will recommend decision sheets to help guide decision making and create a 30-60-90 action plan that outlines the decisions and timeline.
Send us a message today to get started!
Useful Budgets
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