“Failing to plan is planning to fail.” Preparing your business budget is all about planning. A budget doesn’t have to be perfect. The most important thing is that you spend the time looking at where you are now and where you want to go. Then you can identify what realistic forecasts for your profit, expenses, and sales are.
First, spend time writing down your goals. Be ambitious. Don’t worry if they look like they are not achievable right away. The goal here is to get your mind working at ways that it’s going to figure out these tasks. Our brain has developed over millions of years so that when we start to look at a problem (or a goal in this case), we can unconsciously think of how we are going to achieve it. With your goals subconsciously in the back of your mind, you will start figuring out all sorts of ways to achieve them. Doors will open, and you will take advantage.
If you have set some ambitious goals (as you should), they aren’t likely to be achieved within one year. We suggest breaking your goals down from 10 years to 5 years, to 3 years, to 1 year, then 90 days. Start from 10 years and work your way down to 90 days. Using your ten years stretch goal as a stick in the sand, write down what needs to happen in 5 years for you to get there in 10 years. Then, do the same down to 90 days. It’s not about being perfect. It’s about starting somewhere and making an action plan. You are never going to get anywhere without acting and starting somewhere.
Next, turn those goals into numbers. What do your accounts need to look like to achieve them? If you are doing this for the first time, you can start with extracting your accounts from your online cloud accounting software, then inputting forecasted amounts so you can see where you need to go.
Look at where you are now and where you want to go. The difference is your gap. Start with the 90-day gap. Looking ahead only at 90 days makes your 10-stretch goal broken down into a bite-size actionable chunk. Where is the gap? Is it revenue, cost of sales, your capacity? Once you know the gap, you can start thinking of action steps to help work towards these goals.
See where things go after one month. Are you on track to meeting your 90-day budget? If not, adjust your action plan. The point is that you are setting a goal, creating an action plan, and changing your approach if things don’t work out. If things worked out, you can now increase the goalpost and set a new budget/forecast. The whole idea is for quick wins. You don’t need a radical change overnight. Doing 1% better each day can add up to a significant improvement over one year! Everyone can do 1% better.
To achieve success, keep these things in mind.
1. Simplicity – The easier, the better.
2. Review your budget at least monthly. Compare the budget to actual.
3. Have an accountability partner – see if you have a friend (or accountant) who can hold you to your goals and budget. Sharing your plans with someone sets that plan in stone.
Have that person check in with you (at least monthly) to see how you are doing and discuss why you have (or haven’t) met your goals and budget. You will be surprised by how much accountability helps you succeed.
“The American Society of Training and Development (ASTD) did a study on accountability and found that you have a 65% of completing a goal if you commit to someone. And if you have a specific accountability appointment with a person you’ve committed, you will increase your chance of success by up to 95%”
These numbers blew my mind! So that’s why at Argento CPA, we offer accountability in all our business advisory services. The accountability check-ins have done wonders for our clients, and it’s a simple strategy to achieve success.
At Argento CPA, we have made advisory simple. Our 5-step process is as follows.
1. Understand where you are now?
2. Where you want to go?
3. What’s the gap?
4. Create a plan.
5. Measure results.
You didn’t start your business to become an accountant, and we get that! But that doesn’t mean your off the hook for setting budgets and financial models. Instead, hire a CPA who has experience with growing small businesses from scratch. Under our proven framework, we can help steer your business in the direction of your 10 year stretch goals, and work with you every month to make sure you have an action plan set in place, and goal post in sight.
Contact Argento CPA for assistance on creating a budget and action plan!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.