Budget: Stay on track or waste your time

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Did you make the money, the profit, that you wanted to this year? If you didn’t there are only two reasons.

Only two!

Either you didn’t have the revenue that wanted to have or you overspent. That’s it.

There’s only two ways to affect profit. It’s your revenue, your turnover, or your annual expenses.

You may have financial goals for the year. But what you also need is a financial budget broken down by month.

The reason why this is essential is this is feedback on whether your plan is working or not and the shorter the feedback loop the better.

You don’t want to wait until the end of the year which is what most business owners do. What most business owners actually do is they just try and do a load of stuff and at the end of the year they go to their accountants and say “did we make money?” Which is just dumb.

A short feedback loop means you can adjust the plan to make sure whether you’re on track with your profitability.

The second dumb thing people do is to try stuff and just see what happens. Other people try and go for a revenue figure and then hope that there’s a theory that that’s going to make them the profit. That’s stupid. Figure out the profit that you want, start with the end in mind, and re-engineer a budget and a p&l for next year.

So the exercise is quite simple. Take your profit and loss statement for your different sales categories, your different expense categories, your cost of goods, etcetera, and break it down by month next year.

So if you take your total revenue that you want to make next year and your total profit there for your expenses, break it down by month or what money are you going to spend and where and what revenue are you going to produce and where.

If you don’t do this you’re shooting yourself in the foot. You really need to have this, otherwise, you know you’ve just not got a goal. It’s just a dream. It’s just a random idea and it’s not going to succeed. Not with the same level of certainty that you can get results you want if you have a proper budget.

So take action, I look forward to speaking to you very soon.

 

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