In a recent article I discussed the importance of budgeting as a critical step for any profit driven business.
Now let’s take a look at the advantages of planning for profit and budgeting…
- Becomes a process of planning for future growth: Your budget should account for increased sales targets, an increase in cost of sales (relative to sales increases) and map out the increase in the business’s fixed costs as per the overall business plan… E.g. Labour, fleet, utilities etc… The budget should accurately reflect the overall business plan from a financial viewpoint.
- Gives the business owner greater control and decision-making abilities based on real life variances rather than a gut feel or intuition. You can review the Actual vs Budget and look for variances such as:
- Underperforming sales – increase the marketing activities and sales conversions.
- Cost too high – cut back on spending, negotiate with suppliers or cut wastage.
- Production / performance too low – improve productivity in teams or remove bottlenecks / improve process efficiencies.
- Operational expenditure can be predicted and managed to ensure the operational capital is not being wasted on unessential operational and capital expenditure. It provides guidelines on what can and cannot be spent. Running a business Mean and Lean is the key to a profitable business.
- A budget gives clarity and sets motivating targets for the business owner to work towards.
- Budget setting tip: After working with many business owners, a word of advice… The budget must not be so set in stone and rigid that it doesn’t allow for creativity and innovation.
Some business owners can be too locked in to their conservative forecasts, so that it actually restricts them rather than focusing on the bigger picture.
It is important to be bold and courageous, to set way out there goals. The world needs more people to step up to the plate and challenge the norm of what is achievable.
“A goal is not always meant to be reached,
it often serves simply as something to aim at.”
– Bruce Lee
Let us show you how to create an effective and realistic budget for your profit goals in our 4-It System. You will have more confidence when your business grows and reaches the level of success you deserve. Click here for your FREE strategy call now. Limited bookings available.
Rob Kropp – The Profit Coach
About the 4It System for your business and life: The Make It, Manage It, Keep It, Grow It™ (4-It System) will help you structure your business in a way to make leveraged profit. Manage excess earnings so you can scale effectively. Keep more money in your top pocket. Then grow it, so you can play a much BIGGER game than just the business. Your wealth will expand as your financial freedom turns from a dream into a reality through building a business, living a life and leaving a legacy.
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