Imagine it’s December 2020, and you’re reviewing the results of your business for the past year and you notice that compared to 2019, your profits are WAY up, AND, you didn’t have to kill yourself to make it happen! How great will that be?!
That’s what’s possible when you operate your business with a plan. Planning for increased profits by creating an operating budget for your business. I don’t just mean a revenue plan (most people have one of those), I mean planning for bottom-line net profits and increased cash flow. In today’s video, I’m going to share with you the tools and steps to employ to help you do just that for your business!
Before I jump in, let me ask you a question. Are you one of those people who thinks that doing budgets for your company is a waste of time? Maybe you feel like you never meet your goals, so why bother. Or maybe you feel like it’s restrictive and limiting, and you want to have freedom and choices about what you do with your money?
It doesn’t have to be that way when budgeting is approached with the right mindset. In fact, it can be the most empowering and liberating thing you’ve ever done for your business! It’s just like preparing an estimate on a project. When you bid a job you:
- Get intentional in figuring out what it’s going to take to complete the work
- You determine what it’s going to costs
- You build in mark-ups to generate a profit
- You figure out how to do the work within a budget
- Then you track your results agains the budget to help you stay on track
It’s just like that when builidng an operating budget for your company, and then tracking your results to make sure it happens.
When you use that same approach to budgeting for your whole business, you can create much more profit for your business, and have cash in the bank when you need it. And just like projects, you have more clarity about that it’s going to take to have it turn out.
Being intentional about planning for profits using an operating budget will give you…
- Money to invest back in your business, which will stimulate growth.
- The ability to offer profit sharing with your employees or offer generous bonuses.
- Cash to pay off debt.
- Cash on hand to accommodate unexpected events or slow receivable payments.
- More money to pay out distributions to YOU
Thinking beyond just revenue, and setting goals for gross profit margin, net profit, and cash reserves, and YOUR paycheck, you begin building a plan for profits that gives you the roadmap for getting from where you are now to where you want to be.
This post and the accompanying video will go in depth on how to set goals for your company and then how to set an operating budget to support those goals. I’m going to walk you through a goal worksheet that’s a great starting point, and then dig into how to develop an operating budget for your business.