December 6, 2010

Let me ask you a simple question: Would you ever get into your car, buckle your seat belt, check your mirrors, adjust your seat, put a paper bag over your head, and drive away?  

Of course not. No need to adjust your seat in your own car, right? Joking, I’m joking!

Driving with a paper bag over your head would be incredibly dangerous. How would you know if you were headed in the right direction? Do you have enough gas to get to where you want to go? What if a yellow or red warning light appeared on the dash? With a bag over your head you would never get the signal that something bad is getting ready to come down the pike.

But let me suggest that that is exactly what happens when someone runs a business without a budget.

Without a budget, you really have no clear idea about the state of the finances of your business. Let’s say that you want to expand. Can you afford to do so, and do you have enough money coming in to cover your proposed bigger monthly nut? You may think you do, and hope you do, but without a budget, if you have a bag over your head, you don’t know, not really.

Part of the problem, let me suggest, is the word “budget.” It has such negative connotations. When people hear the word ‘budget’ they tend to immediately think of restrictive plans that constrain them from doing what they want. A budget seems like a necessary evil at best, or something to be avoided at worst.

That is why a far better word to use is “plan.”

If you want to get to where you want to go in your business, fiscally speaking, then all you need to do is to create a plan. There, doesn’t that feel better already? A budget is really nothing more than a financial success plan for you and your business.

There are all sorts of great things about creating a 2011 plan for your business. The main one is this: It’s your plan. Would you like to spend more money on e-marketing this upcoming year? Great, go for it, it is your plan after all. You can prioritize it in any way that you like.

All a good financial plan is, then, is your best assessment for how you want to allocate your precious resources. After all, few of us have unlimited capital, and that is why you need a plan. In it, you prioritize some parts of your business and plan on allocating more money to those. Other less important areas, or areas where you can afford to cut back, will get less money. If you want to allocate more funds for e-marketing for instance, that may mean that you spend less on contract labor. No problem. It’s your plan after all.

Creating a financial plan for 2011 need not be difficult or time-consuming. It’s just a matter of making a list of expected expenses for the year and projected income. Then prioritize which expenses need what sort of revenue. Play with numbers and percentages. Think about what’s important to you, where you want to go, what it will take to get there, and what that may cost.

As the year progresses, use your plan as a tool. Do you need to earmark for more e-marketing than you had planned on? No problem. Adjust accordingly. Is your e-marketing plan making you more money than anticipated? Way to go.

Related Topics

• Managing

Related keywords

Steve Strauss, Article, budgeting, business plan, financial management, managing