“I love business planning!”
“Me too! And I also love budgeting!”
I know what you’re thinking, and you’re right. This conversation has never, ever happened in the history of business. No business owner likes to do business planning or budgeting, even though these two activities are crucial to an organization’s financial success.
What if I told you I have a way to make both more interesting?
Now, I can’t promise that you’ll have the aforementioned conversation with anyone, but I can tell you that I have a way to help make both business planning and budgeting a little less daunting. Here are the basic steps we’d follow if I was working with you as your company’s fractional CFO:
Step One: Start with a simple budget template
My first step would be to create a basic budget template in Excel, Google Sheets, or your favorite spreadsheet program. We’d include headers for revenue, cost of goods sold, and expenses, customizing the format and categories to those that are relevant for your business,
Step Two: Look forward … and dream big
Our next step would be to talk about what you’d like to achieve in the next year, the next three years, and five years from now. This is where you can be completely honest with me about what you really want your company’s future to hold. Maybe you dream about some of the following:
- Doubling your salary,
- Implementing a 401k plan for you and your employees,
- Paying part or all of your health insurance costs,
- Building a better facility or expanding your current footprint, or perhaps
- Purchasing new equipment or vehicles.
Step Three: Determine how to pay for it
Now, we’ll talk about how to make these dreams a reality — in other words, we’ll need to figure out how we can pay for them. A few things we’d discuss might be:
- How do we significantly increase revenue?
- Do we need more (or better) employees?
- Should we introduce new products?
- Maybe we expand your market area?
- How about engaging a local marketing pro for a new marketing strategy?
And there you have it, folks: a simple budget and business plan, all in one. Now, this plan may not include everything your banker will need to see if you approach them for a loan, but it’s a great start. In completing this exercise, you’ve determined and documented your assumptions, your goals, and your strategies. What else is a business plan, really?
Full disclosure: There’s one more step, and for many business owners, it may be the hardest.
Step Four: Don’t let your plan gather dust on a shelf
In my decades as a trusted business advisor, I’ve seen far too many dusty three-ring binders. A budget should be updated every quarter (that’s four times per calendar year, which shouldn’t give your shelf enough time to accumulate too much detritus). An acceptable quarterly budget update should include:
- Actual numbers from your internal accounting reports,
- A comparison of what you previously forecast compared to the actual results,
- An honest analysis of your performance, and
- Adjustments where necessary.
A budget is a dynamic document, not a static one. By creating this budget and business plan, you’ve already done the hard work. Now all your creation needs is quarterly attention and maintenance. And hey, if this is still something you’re reluctant to tackle on your own, I know someone who can help! Give me a call today at 256-318-8242 and let’s get started.