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Create A Budget For Your Small Business-Run Your Business Don't Let Your Business Run You

This post is from Randy Bourdeau of Bourdeau Consulting Group and the result of a meeting we had to discuss business planning ideas earlier this year.   Dave Drescher 

The Value of Budgeting
For small business it seems like a simple thought process to set up a budget. The reality is more complex and much more important. An active, living breathing budget process acts as a roadmap for your business; it tells you where you are currently, where you plan to be, and how to cope with both expected and unexpected challenges along the way.  Every business should have short-term and long-term goals that can be accomplished if you are committed to a consistent and persistent focus on your budget and the business goals it represents.  The budget should represent both an income forecast as well as clear estimate of fixed and variable expenses that are realistic. Having the ability to look at where you are in your business plan on a monthly or quarterly basis is critical for the decision-making process based not on the fickle whim of cash flow but the laser focus of what your true business goals are.
Looking at one budget is daunting enough for most business owners/managers but having 3 budget s with different objectives and goals allows for a more focused business decision-making process.
 
The 3 types of Short Term Budgets are:
–       Conservative Budget :

  • Worst-Case Scenario (Low Rev – High Exp)

–       Expected Budget:

  • Expected Performance (Middle Rev & Exp)

–       Optimistic Budget:

  • Best Case Scenario (High Rev –Low Exp)

Actions Steps:
–       Income Forecast: Established Business:

  • Look at History and make changes up or down as appropriate

–       Calculate Expenses:

  • Focus on Core Bills:
  • Payroll:
    • A correct estimate on how many employees you need to provide the goods/services you are producing is critical
    • Pay Cycle: Weekly, Bi Weekly or Monthly will affect your Payroll Budget
    • Type of Pay: Hourly/Salary/Commission will have an impact as Payroll costs could go up as sales go up and that should be reflected in your budget

–       Cost to Produce Goods:

  • Make sure your pricing point is above your true costs for your services – so you are making money and not losing money on very transaction

Creating a budget process that is ongoing will give you ownership of the decisions you need to make and at the end of the day lays out a process for documenting where you came from and where you want to go.
To contact Randy regarding your business planning needs:
Randy Bourdeau MBA, CPM, CMPE 
em: randy@bourdeauconsulting.com or call: 860-951-8179

Is Your Business Running You or Are You Running Your Business?

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