Budgeting. Goal-setting.
Oh so very sexy, right?!?!
Not really. But, oh so helpful as a money roadmap for your life and your business.
Now stop groaning and hating life and just do it already.
Budgets defined.
Before we get to the doing, let’s talk about what it is. What exactly IS a budget?
Think of of your dollars as people…that need a purpose. Your dollars need a purpose, they need a job to do.
Your budget is a collection of jobs, the work, that you need your money to handle.
You need your money to make sure the office supplies are purchased, that your cell phone stays on, that the various software you use is available.
See that’s not so scary, is it? Budgeting doesn’t have to be a scary exercise.
Budgeting for yourself, your family and your business can actually be fun.
Okay, I know for some of you, I’ve gone too far with the F word (fun, not the other F word)… but bear with me.
Once you get into the budgeting groove, you’ll actually find yourself saying “let me check my budget” before making major money decisions in your life.
Three Step Process To Budgeting
Step 1: Start at the beginning. What’s your Big Picture?
What is the 10,000 foot view of your life and your journey over the next year, three years, ten years?
What do you see yourself? What do you want your business to be like and to achieve?
What is the balance you want to have? Freedoms you want to have? Experiences you want to have?
We can go down the rabbit hole and spend an entire convo on that (or you can check out more about work life balance and the big picture here).
Step 2: Create SMART Goals that fit your Big Picture
Once you’ve worked on your big vision… ironed out your WHY, it’s time to get to work.
I know this is round about but I have a point. I promise.
Now, folks hem and haw about goals and have their opinions about SMART goals. Do they work or not?
Personally, I’ve had more success with them over the past year when I combined the SMARTness (specific, measurable, attainable, relevant & time-based) with the shorter time frame of the 12 Week Year.
That’s my story and I’m sticking to it. My hope is that this will work for you too.
Step 3: Break down the SMART goals & attach dollar signs
NOOOOOW, that you have daydreamed a bit and you have your SMART goals ready to do, you can’t stop there.
You have to keep going. Take it a step further.
Use the goals to create your budget.
Revenue Budgeting Example
For example, let’s say that your SMART Goal is: To get 20 new customers by December 31 (over the course of a quarter).
Part A: Breakdown that goal into action goals.
Quarter 1: 4 new customers
Quarter 2: 5 new customers
Quarter 3: 5 new customers
Quarter 4: 6 new customers
Total of 20 new customers (as per the goal).
Part B: Attach a dollar amount to the action goals.
Let’s assume each new customers brings in $199 of revenue.
Quarter 1: 4 new customers x $199 = $796
Quarter 2: 5 new customers x $199 = $995
Quarter 3: 5 new customers x $199 = $995
Quarter 4: 6 new customers x $199 = $1,194
Total revenue of $3,980 (or 20 new customers x $199).
Don’t Forget…the Expense Budget
Keep in mind, this is just your revenue budget…
For a little extra credit, you can also add your monthly expenses to get a fuller picture of your projected business finances.
Put things into your Expense Budget like: advertising/marketing, merchant service fees, office supplies, software expenses, staffing/contractor services, etc.
Just keep in mind, if you stop at income…you’re just looking at half of the picture.
Recap: Revenue Budget – Expense Budget = Your (Full) Budget
So let’s recap. To create a quick revenue budget, start with your big picture & your SMART sales goal.
Once you have your SMART sales goal… benchmark it.
Then based on your benchmarks, create your revenue budget.
Then if you want a full picture (or a full budget), create your expense budget.
See, that wasn’t so painful. Was it? So get to it and do some budgeting for your business.
This is just a glimpse of what I do with my clients as their Virtual CFO. Goal setting all the way to budgeting and money matters.
If you have questions or think you might want to work with me, don’t be shy. Let’s chat.
Until next time,
J
Notes & Resources:
Work With Me – Virtual CFO
7 Days To Better Books ecourse
Bookkeeping Basics Checklist
Templates & Checklists (like budgets)
Big Picture, Work/Life Balance
Get Smart Goal Setting
The Minimalist Guide To Staying On Track With Your Goals
Editor’s note: This post was originally published in May 2013 and has been completely revamped and updated.
Fantastic ideas, learnt a few tips