Budgeting and planning for success
Lack of planning and budgeting is a key reason why many businesses fail in their first few years of operation.
Planning, budgeting and forecasting is critical to the success of the business to ensure that, as an owner of a business, there is a benchmark to measure the actual performance.
This does not have to a be detailed plan it can be simple and easy to understand. It provides the business owner with an opportunity to think about how they are going to grow the business, how they will fund the business and how they will operate this business, plus determine what resources they have at to deploy.
A budget or plan is a combination of physical and monetary targets and is a guide. It is not fixed in stone. The budget or plan needs to be flexible to adapt and change to business circumstances and economic conditions.
A budget helps to understand the following:
- Costs of doing business.
- Cost of overheads.
- Cost of inputs and outputs (freight for example).
- Cost of labour.
- Cost of client or customer acquisition.
- Cost of raising finance and funding.
- Shows when funds are needed and potential sources of funding plus cost of finance.
- When employees or contractors are needed.
- Shows seasonality in the plan.
- What assets are available to use in the business and maintenance of those assets or when replacement might be necessary.
- Most importantly, where to price your product or service in order to make money.
- Critical to success is a Marketing Budget for any new and existing business.
The list can go on, but it is essential to have a plan or a budget for any business, even a hobby that is to become a business.
Financiers including friends, relations, banks, crowd funding sources will require some sort of budget or plan to commit their money and resources to your business.
Take time to celebrate when you have achieved your targets and reset your targets to achieve more if you find your budget or plan is being achieved to easily. If you are not achieving your budget or plan, then take the time to critically evaluate why you are not achieving it and make the necessary changes to your business model. Do not leave it until it is too late.
If you need help with putting a business plan or budget together, please contact TaxAssist Accountants.