0:00

Welcome to the How of Business

0:02

with your host Henry Lopez the

0:04

podcast that helps you start right

0:06

and grow your small business. And

0:08

now here is your host. Welcome

0:12

to the How A Business Podcast! This

0:14

is Henry Lopez and this episode is

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about the fundamentals of small business budgeting.

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Why should you create an operating budget?

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And how do you create an annual

0:23

budget that helps you maximize profitability and

0:25

your small business? So I will share

0:27

some best practices and tips and walk

0:29

you through the key steps to creating

0:31

your operating budget. And I also have

0:34

a few free spreadsheet tools downloads that

0:36

you can use to help you create

0:38

and manage your small business budgets. You

0:40

can find. The shows page with this

0:42

episode, all of my other small business

0:45

resources and to learn more about my

0:47

one on one coaching and group coaching

0:49

programs, please visit The How A business.com

0:51

I also encourage you to please subscribe

0:53

to my show wherever you may be

0:55

listening so you don't miss any new

0:57

episodes. So this episode again I'm going

0:59

to share with you the fundamentals of

1:01

small business budgeting. This is really for

1:03

you. If you've never done budgeting or

1:05

maybe you've begun to do budgeting, may

1:07

be year was the first time you

1:09

took a stab at budgeting Most. Of

1:11

us a small business owners don't really

1:14

do any kind of formal budgeting and

1:16

so that's what this episode is about.

1:18

Hopefully get you to at least this

1:20

year, put together a basic budget to

1:22

help you manage those key expenses and

1:24

the ultimate goal of achieving a targeted

1:27

profit margin for the year to image

1:29

and several free downloads and so what.

1:31

You'll find it. The showed page for

1:33

this episode at the How A business.com

1:35

is the primary budgeting tool that have

1:37

created for this which I'm calling a

1:40

small business expense budget tool. It's a

1:42

spreadsheet that you can download and it

1:44

will help you create a basic budget

1:46

for your operating expenses. Then I also

1:48

have specifically a marketing budget tool which

1:50

is if you wanted to budget just

1:52

your marketing expense which is a great

1:55

place to start of you're not doing

1:57

any budget A because that's an expense

1:59

that can. Easily get out of control

2:01

or much maybe you've posted. Like most

2:03

small business owners, we really don't have

2:05

a plan for your marketing budget, so

2:07

this tool will not only serve to

2:09

help you budget, so I'm going to

2:11

allocate a certain percentage of my projected

2:13

revenue use and stick to a plan.

2:16

The. Idea of budgeting for marketing and

2:18

from other variable expenses is to

2:20

measure it and manage and control

2:22

it. So. Related to that, let

2:24

me start with why do you need

2:27

a budget? In my opinion, an experience

2:29

and the experience of other successful business

2:31

owners, Creating a budget is one of

2:33

those fundamental aspects of running a more

2:36

sophisticated business. As you're growing your business,

2:38

It really is a critical component to

2:40

helping you manage your business financially. And

2:42

here are some of the specific reasons

2:45

I would like you to think about

2:47

to consider to be good budgeting in

2:49

your small business. First, an obvious his

2:51

financial control. So a budget allows. You

2:54

as a business owner to establish control

2:56

over your finances. It helps you had

2:58

managing cash flow and ensuring that your

3:00

expenses are going to be covered but

3:03

also avoiding overspending. Were avoiding a particular

3:05

category A variable expense category getting out

3:07

of hand. What you have some sure

3:09

found in what I have found is

3:12

again when you focus on something, when

3:14

you measure it, when you keep it

3:16

visible and you set a goal, you're

3:19

much more likely to be able to

3:21

manage that expense and not be surprised.

3:23

At the end of the year Garcia

3:25

Reason is as it should be, part

3:28

of your planning and goal setting. Budgeting

3:30

should be an essential tool for you're

3:32

planning especially the beginning of the year

3:34

and part of setting your financial goals

3:36

for the year is gonna provide you

3:39

with a framework for making then informed

3:41

decisions about how to allocate your resources

3:43

to achieve your goals for the year.

3:45

As business owners, we have a limited

3:47

resources and we're trying to generate as

3:50

much profit as possible based on our

3:52

business model. So managing our expenses as

3:54

one component to that that the only

3:56

thing obviously increasing revenues. Other things are

3:58

important as well. But managing our expenses

4:01

is critical to that. and for most

4:03

of us, as we're starting our business,

4:05

we really don't focus as much on

4:07

that were in that start up mode

4:09

and we probably don't have that same

4:11

rigor attention to detail on the financials,

4:13

but it's important if you can start

4:15

that way Fantastic. Or if you're as

4:17

a point now where you're a couple

4:19

years into your business or maybe longer

4:21

and you've never done budgeting, this is

4:23

a great time to think about starting

4:25

with a business bunch of because then

4:27

the other thing it allows you is

4:29

to measure your performance. A budget serves

4:31

as a benchmark against which you measure

4:34

your actual business performance monthly and quarterly

4:36

as you progress through the year of

4:38

and your identify where there are variances,

4:40

where you might need to make adjustments,

4:42

where there might be a trend. This

4:44

troubling that you might want to get

4:46

on top of instead of waiting until

4:48

the end of the year to try

4:50

to change it or fix it. So

4:52

budgeting is not just a financial exercise

4:54

is not against something you just do

4:56

once. It really should be a comprehensive

4:58

process. it or not to be complicated.

5:00

Especially be haven't done it before

5:02

but a process that reflects and

5:04

shakes the strategic direction of a

5:07

small business alleys from a financial

5:09

perspective, so it helps he was

5:11

setting priorities, making informed decisions, and

5:13

steering the business towards this goal

5:15

in particular the ultimate goal which

5:17

has to have a highly profitable

5:19

small business. So. They're all types

5:21

of budgeting technically speaking, but since I'm

5:24

not an accountant and you're probably not

5:26

an accountant either of you're listening to

5:28

this episode for going to keep this

5:30

very simple. Essentially, for most small businesses,

5:33

you're either going to do some form

5:35

of incremental budgeting was simply means that

5:37

last year you had a budget and

5:39

now you're going to create this year's

5:42

budget based off of incremental, perhaps are

5:44

adjusting last year's budget, Or like a

5:46

lot of us, we might do zero

5:48

base by city, Which is we're starting.

5:51

From Zero either because you don't want to

5:53

be influenced by last year's budget or you

5:55

haven't done budgeting And so you're going to

5:57

start from Zero. hence the term zero based.

6:00

Budgeting. You. Don't need to

6:02

consider related to budgeting is cash

6:04

flow. Budgeting are forecasting. guess slope

6:06

if you have seasonal fluctuations or

6:08

you have considerable receivables more, You

6:10

make a large inventory purchases periodically

6:12

throughout the year, Or you're planning

6:14

to make a large capital investment

6:16

and so you need a manager

6:18

cash very carefully. So that is

6:20

a type of budgeting. Now if

6:23

that's the challenge for you and

6:25

that's really what you have to

6:27

improve this year, than I would

6:29

recommend listening to episode four. Thirty

6:31

Nine on that episode. Episode Four

6:33

Thirty Nine Cashflow Management. I do

6:35

a deep dive on cash flow

6:37

management and forecasting and the spreadsheet

6:39

that I mentioned here is also available

6:41

for that episode which is to

6:43

help you forecast cast needs. So

6:45

that is a type of budgeting. In

6:48

essence were kind of doing some

6:50

of that would you create a traditional

6:52

budget but without the forecast of

6:54

adding in what we have and way

6:56

of cash on hand and how

6:58

much cash we might need to

7:00

add. So. What I'm Milwaukee

7:02

Zoo in this episode is essentially the

7:05

steps for Zero base motoring, which is

7:07

you're going to start from scratch either

7:09

to create a comprehensive budget meeting it

7:11

would cover most if not all of

7:13

your operating expenses or you start on

7:15

a specific group of those expenses, which

7:17

is the approach I prefer of you

7:19

haven't done budgeting so that is not

7:22

overwhelming and you start on those key

7:24

expenses that you want to manage better

7:26

this year so will focus on an

7:28

expense budget. We're not going to talk

7:30

about revenue budgeting or. Projections: If you're

7:32

looking to do or you haven't done

7:35

your annual strategic plan yet, then go

7:37

back to episode Viable for on annual

7:39

strategic plans And there you have some

7:41

of the same steps. So if you

7:44

went through that and you've done that,

7:46

some of this might sound repetitive. so

7:48

you can skip some of these steps

7:51

if you already done your high level

7:53

financial projections. For example, if you've already

7:55

completed reviewing last year financials, then you'll

7:57

move forward to the budgeting step. Here

8:00

if you've already done that work. I.

8:02

Have outlined nine steps to creating your operating

8:04

budget and you can find his outline on

8:07

the show. Know speech for this episode at

8:09

the How A business.com Spend a walk you

8:11

through them here at a high level so

8:13

that you understand the basic steps. A high

8:16

level steps to creating a operating budget. So

8:18

first is to review last year's financial performance.

8:20

He got to start by analyzing what your

8:23

business did last year financially and this means

8:25

that of course you have to have updated

8:27

inaccurate financials if your financial woes are a

8:29

mess and that's okay of the are that

8:32

just. Means you have to start their

8:34

if you don't have that cleaned up

8:36

first in Aca, be able to do

8:38

very accurate budgeting so focus on that

8:40

First of, that's where you are. You

8:43

have to have your previous years financials

8:45

so that you can refer to them

8:47

and stuff number two which is to

8:49

set your business calls. So first step

8:51

is to look at last year's performance

8:54

from a financial perspective. That's the baseline

8:56

upon which you will create your budget

8:58

for this year. and as you're reviewing

9:00

that your identifying perhaps those expense categories.

9:02

Especially those variable expense categories for maybe

9:04

there was a problem or a challenge

9:07

or a lot of money was spent

9:09

that you weren't really projecting to. So

9:11

those things like maybe market he spends

9:13

or maintenance these viable expenses that you

9:15

now want to have better control this

9:17

year on and a way that we

9:19

do that is by giving i'm increase

9:21

visibility and a tool that we used

9:23

to do that is this budget that

9:25

you're going to create. So that September

9:27

One reviewing last your stuff two as

9:29

I said is to define your goals

9:31

If you've created. your strategic plan then

9:33

you've got this already if you haven't

9:35

or you're not going to create a

9:38

c declined you need to at least

9:40

said some target goals financially for the

9:42

year in particular you've gotta set a

9:44

goal for revenue this realistic based on

9:46

your performance last year and what you're

9:48

anticipating and projecting your growth will be

9:51

for this year so forecasting you revenue

9:53

an estimate of your revenue for this

9:55

upcoming year and this is a course

9:57

based on past sales data marketing term

9:59

and any known changes like

10:02

new products that you're bringing to the

10:04

market or price adjustments. You want to

10:06

be realistic with your projections but of

10:09

course, budgeting is based on, like I

10:11

said, a percentage of projected revenues for

10:13

each of your expense categories based on,

10:16

in part, what you needed to allocate

10:18

or what was allocated to those expense

10:20

categories last year. And equally

10:22

important is to set a target

10:25

profit margin, the net operating margin.

10:27

So the money that's left over

10:29

after all of the expenses but

10:31

before taxes, that's that money that

10:34

is available to distribute, although you

10:36

may not distribute it all, but

10:38

that final bottom line profit. What

10:40

is that as a percentage of

10:42

the revenues that you're

10:44

targeting to achieve, the income that

10:46

you're targeting or sales that you're

10:49

targeting for this year? So those

10:51

two numbers are essential to do

10:53

your budget to put together your budget

10:55

for this coming year. This

11:01

is Henry Lopez briefly pausing this

11:03

episode to invite you to schedule

11:05

a free coaching consultation with me.

11:07

I welcome the opportunity to chat

11:09

with you about your business plans

11:11

and offer the guidance and accountability

11:13

that we all need to achieve

11:15

success. As an experienced small business

11:17

owner myself, I understand the challenges

11:19

you're experiencing and often it's about

11:21

helping you ask the right questions

11:23

to help you make progress towards

11:25

achieving your goals. Whether it's

11:27

getting started with your first business or

11:29

growing and maybe exiting your existing small

11:32

business, I can help you get there. To

11:34

find out more about my business coaching

11:37

services and to schedule your free coaching

11:39

consultation, please visit

11:41

thehowabusiness.com. Take that

11:43

next step today towards finally realizing

11:45

your business ownership dreams. I look

11:48

forward to speaking with you soon.

12:00

Rent? perhaps Salaries: Although they could be

12:02

some fluctuation in salaries if you're looking

12:04

to hire or make wage increases, but

12:06

typically they're fairly fix it. otherwise they

12:09

don't fluctuate too much. A dependent on

12:11

sales or insurance. A dead service Of

12:13

these are expenses. Again, they don't change

12:15

much from month to month and are

12:17

typically easier to predict or to budget.

12:20

So the estimate for fixed expenses can

12:22

be fairly accurate for the year. But.

12:24

We do want to consider your contracts,

12:27

it might be expiry more a least.

12:29

it might have a bump and rent

12:31

halfway through the year or some other

12:33

rate increases that might well impact these

12:36

fixed expenses. even if they're not impacted

12:38

by revenues. Your fix expenses typically amount

12:40

for the bulk of what's called the

12:42

burn rate, which is how much money

12:45

you spend on these expenses regardless the

12:47

sales. In other words, if you had.

12:50

Zero. Sales for the month. How

12:52

much working capital would you need

12:54

to cover these fixed expenses and

12:56

budgeting and part helps you determine

12:58

how much working capital you do

13:00

need. Now admitted Obama to go

13:02

about forecasting for cash flow and

13:04

so if you're tied on working

13:06

capital if you don't have were

13:08

last year didn't have enough and

13:10

some type months then certainly I

13:12

want to encourage you to do

13:14

some forecasting, some cash flow forecasting

13:16

and perhaps do that type of

13:18

budgeting first. Or in addition. To

13:20

your overall operating budget. Set.

13:23

Number for says to make your

13:25

variable cost So variable costs which

13:27

are the ones that fluctuate depending

13:29

on your sales volumes. These include

13:31

things like the A raw materials

13:34

of course your cost a good

13:36

sold the ship being commissions, maintenance

13:38

my be viral marketing expenses Although

13:40

marketing expenses as a tough one

13:42

and often wondered people do not

13:44

Man is very well and you

13:47

do want to set a goal

13:49

based on a percentage of your

13:51

projected revenues you know across industries.

13:53

Typically for marketing as anywhere between

13:55

five and ten percent of your

13:57

projected remedies for the year and.

14:00

That's a particular expense category that

14:02

you want to budget and manage

14:04

and track very carefully throughout the

14:06

year. September. Five is to

14:08

plan for any one time expenses. I

14:11

mentioned this when I was talking about

14:13

cash flow forecasting and you'll consider it

14:15

their as well. but are there any

14:17

one time expenses are coming up this

14:19

year that need to budget for? Maybe

14:21

a remodel? May be equipment purchases, are

14:23

renovations or a special marketing campaign? What

14:25

are those things that you need to

14:28

budget for as well? That could be

14:30

one time Expenses number six I mentioned

14:32

already is working capital so identifying how

14:34

much you need to set aside or

14:36

add to whatever. Hopefully you came into

14:38

this year in a way of working

14:40

capital. Maybe you're good. There may be

14:43

your set that's fantastic for most small

14:45

business owners. I find that you're a

14:47

little tight on working capital or very

14:49

tight on working capital. so budgeting could

14:51

also includes setting aside a portion of

14:53

your money of your projected revenues for

14:55

working capital. Generally speaking, this is just

14:58

a rule of thumb. We should look

15:00

at having and working capital anywhere between

15:02

one and two months of our fixed

15:04

expenses, but it also of course these

15:06

to cover any. Planned large

15:08

purchases like periodic large

15:10

inventory purchases are rather

15:12

capital investments. September. Seven

15:15

is to put this all together. Once

15:17

you've done that analysis and determined what

15:19

your goals are and calculated based on

15:21

your P N L, what those bearable

15:23

and fixed expenses are then is actually

15:25

put it all together in a bunch

15:27

of now, you can use different tools

15:29

that exists. You could use Quickbooks for

15:31

example, or whatever used for your financials.

15:33

They all typically have some sort of

15:35

of budgeting module A.my be the way

15:37

to go, especially if you're comfortable with

15:39

that works. If perhaps your book keeper

15:41

Cp A is going to help you

15:43

with the technical aspects. Of constructing the

15:45

by to write, you and your management

15:48

team will have to make these decisions

15:50

but then actually how you're going to

15:52

implement the budget meeting. track it and

15:55

plugin the numbers and depends on your

15:57

situation. The simplest thing is to use

15:59

the. The bread she did. You

16:01

can download that I mentioned and

16:03

use that spreadsheet to put together a

16:06

budget. Sept Number Eight is to review

16:08

and adjust. So critically review your budget,

16:10

ensure that it's realistic and that aligns

16:13

with your business goals and adjusted is

16:15

necessary of course. Always keeping in mind

16:17

that you wanted save a certain

16:19

profit margin. You may one of

16:21

course get reviewed by your partner's, your

16:24

leadership team. Your Cpj get that input

16:26

so that you can finalize your

16:28

budget and instep. Number Nine is

16:30

continuous. Monitoring an adjustment but actually using

16:32

it as a tool I would say

16:34

that you want look at your budget

16:36

at update the actual because which will

16:38

see in the spreadsheet tool that you

16:40

can download from the show notes page

16:42

is your lay out your budget for

16:44

all of the different categories you decide

16:46

on a breaks it down by months

16:48

the didn't buy a quarter and then

16:50

you will plugin on a monthly basis.

16:52

The actual numbers so that you can

16:54

see how you are tracking is one

16:56

of the reasons has good the looked

16:58

at it on a quarterly basis. And

17:00

as dissuade, the spreadsheet is broken down

17:02

his you might have a fluctuation in

17:04

a particular months that they might smooth

17:07

out over a quarter period of time.

17:09

specially of us, a seasonal business. and

17:11

you have normal fluctuations anyway. if you

17:13

do have a seasonal business, you definitely

17:15

want to. Probably I just a budget

17:17

for that work. If not, if it's

17:19

fairly smooth throughout the year, than then

17:21

you'll leave it straight line all the

17:23

way across the twelve months. so you

17:25

want to review it monthly, at worst

17:27

case, on a quarterly basis so that

17:29

you're actually. Using it as a tool

17:31

not just a goal that you said at

17:33

the beginning of the year and it is

17:36

gathering dust somewhere. He also want to be

17:38

prepared to adjust your budget depending on changing

17:40

circumstances. Let's say that you know year as

17:42

and going are ramping up as quickly as

17:45

you and hope you may need to adjust

17:47

your budget down particularly and marketing. Or.

17:50

Let's hope it's a reverse. You know you're having

17:52

a greater year than you thought, so you may

17:54

need to adjust something. Is there a nice to

17:56

be a working tool so that it serves you

17:58

just like your? Rather funny and. The Tools

18:00

as you're managing your business throughout

18:02

the year. So.

18:07

I've highlighted a couple times the focus

18:10

on profit and you may have heard

18:12

of maybe some of you are following

18:14

the Profit First approach Profit First as

18:17

a book written by Mike my colleagues

18:19

and in this book he offers a

18:21

very unique perspective, but a very effective

18:23

perspective on financial management for small businesses

18:26

and in particular a call from that

18:28

book that I think applies here very

18:30

simply. as he says quote, Profit is

18:33

not an event. Profit is a habit

18:35

suit. Think about that. This is a

18:37

habit. Teacher Developing now to budget

18:39

and to continuously monitor where the

18:42

money is going because you've got

18:44

accurate enough to date financials that

18:46

you reviewing on a monthly basis

18:49

and a budget at least for

18:51

those key expense categories that you're

18:53

also measuring and monitoring on a

18:55

monthly basis. So. The Profit

18:58

First Methodology and I would encourage

19:00

you to read that book and

19:02

apply if not all of it

19:04

than key components of the methodology.

19:07

It emphasizes the importance of prioritizing

19:09

profit and every financial decision. That's

19:11

why I said that establishing your

19:13

profit goal is critical and then

19:16

in essence, we work backwards from

19:18

there. So what Mike Mcconnell X

19:20

challenges is the traditional way of

19:22

looking at finances which is sales

19:25

minus expenses equals profit which is.

19:27

True, but would he say is

19:29

to change your focus to a

19:31

different formula which is sales Midas

19:33

profits equals expenses to get the

19:35

subtle difference there. and other words,

19:37

what is your sales gold is

19:39

real estate. What is the target

19:42

profit margin? That's realistic. If your

19:44

business model has historically or in

19:46

the industry generates lead say on

19:48

average at ten percent net operating

19:50

profit margin and all the sudden

19:52

you set a goal for fifty

19:54

percent as not gonna happen no

19:56

matter. How much you tighten your belt on

19:58

the expenses, right? said. The be realistic,

20:01

but when you set that, you

20:03

then take sales minus what you're

20:05

planning for profit and the rest

20:07

is allocated in a budget to

20:09

the rest of your expenses. Such

20:11

a different way of looking at

20:13

your financials. Now the challenge there

20:15

though that I do want to

20:17

share, is that if you've got

20:19

a business model and you've heard

20:21

me talk perhaps many times on

20:23

this podcast about the difference between

20:25

a business idea and a profitable

20:27

business model, if you got a

20:29

business model that simply. Isn't profitable for

20:31

you've got a bigger problems and Budgeting

20:33

highlights that because it shows you that

20:35

no matter what, no matter how much

20:37

you wrangle in the expenses, no matter

20:39

how much you tighten the budget, it's

20:41

don't I can give you enough of

20:43

a profit for it to be worthwhile.

20:45

And that's when we have to start

20:47

to make very tough decisions about adjusting

20:50

for pivoting that business model. But let's

20:52

come back from that. That's not what

20:54

this episode is about. It is though,

20:56

one of the side benefits of budgeting

20:58

is it is a way to validate.

21:00

The profitability of your business model.

21:02

but going back to profit first.

21:04

This approach in this mindset of

21:06

starting with your profit goal and

21:08

then backwards if you will. Odd

21:10

determining what you can allocate all

21:12

of your different expenses is a

21:14

great way to budget and to

21:16

manage your business financially. So.

21:18

The High level. Those are the nine

21:20

steps to creating an operating budget. So

21:23

where do you start? So it depends

21:25

on where you're at and what you've

21:27

done prior. Certainly first, you have to

21:29

finalize your financials for last year. So

21:31

that is where you start First and

21:33

foremost. then you need to determine do

21:35

I need a comprehensive budget more. Do.

21:37

I start with see a certain expense

21:39

categories that I want to measure this

21:42

year like a marketing and maintenance. If

21:44

you want to just focus on marketing

21:46

then I've got the marketing Budget tool

21:48

which is essentially a budgeting tool just

21:51

for your marketing expenses are you could

21:53

do both. He could do the more

21:55

comprehensive budget that has multiple categories, but

21:57

then for marketing you do a more.

22:00

Detailed breakdown in the marketing budget to

22:02

I know that sounds like a lot

22:04

but with the marketing budget to allows

22:06

you also is to put together essentially

22:09

a plan for how and where you're

22:11

going to spend your money on marketing

22:13

this year. So it's much more than

22:16

just a dollar amount, it's to different

22:18

activities and how much Bajaj or allocating

22:20

to those individual activities within the marketing

22:22

expense. Then. Take the Small Business

22:25

Expense Budgeting tool that you can download

22:27

at the Show Knows page for this

22:29

episode of the How A Business Com

22:31

and put together your budget. The spreadsheet

22:33

is just a template. Modify it however

22:35

you want so take out rows and

22:37

rows. You're gonna see that has some

22:39

of the more typical expense categories, but

22:41

you don't have to use all of

22:43

those are you may have one or

22:45

two that I don't have on that

22:47

template. you're simply change. The spreadsheet is

22:49

not a very complex spreadsheet and remember,

22:51

you don't have to start with a.

22:53

Comprehensive budget for every single expense

22:55

category, so you could just start.

22:57

I recommend with those tude or

23:00

maybe five expense categories that are

23:02

the most critical for you to

23:04

monitor this year and to manage

23:06

so that they don't get out

23:08

of hand. You can be proactive

23:10

about managing it so that it

23:12

doesn't affect your net operating margin.

23:14

Go for the year. To.

23:17

Summarize, then my key take the ways

23:19

you need a budget. but you can't

23:21

create a budget until you've got your

23:23

financials completed for last year. so that

23:25

comes first. Budgeting is a great way.

23:27

Now if you haven't done it before,

23:29

it to take that next step up

23:31

in how you manage your business, that

23:34

next level of rigor in your financial

23:36

management in particular to help you manage

23:38

and control those bearable expenses that you

23:40

have to keep a close eye on

23:42

and if you focus on them. And

23:44

if you incentivize and give your team

23:46

transparency. On, you're more likely to

23:49

achieve your goal for those expense

23:51

categories and then it's all about

23:53

been a widow. Achieve your profit

23:56

margin goal. Remember to think about

23:58

starting with your profit. In

24:00

mind First and then you calculate

24:02

what you can allocate to each

24:04

of your variable expenses. Every small

24:06

business needs some level of expense

24:08

budgeting so that you can establish

24:10

and maintain some goals and provides

24:13

you that additional financial control. As

24:15

I mentioned earlier, if you're challenge

24:17

in particular is a cash flow

24:19

challenge the maybe that's where you

24:21

start as by creating that cashflow

24:23

forecasts ad In that sense, you're

24:25

managing more, the money is going

24:27

and what she'll need. Looking forward.

24:30

To or three months and away of

24:32

expenses. But a budget really takes it

24:34

a step further. With a budget, you're

24:37

putting a stake in a ground as

24:39

as realistically based on what we did

24:41

last year, maybe the year before as

24:44

well, this expense category should be no

24:46

more than x percentage of my targeted

24:48

revenues. You allocate that you manage it,

24:50

you monitor it, and that's how you'll

24:53

achieve or more likely to achieve sticking

24:55

to those percentages and achieving your target

24:57

profit margin. I. Wish you best

25:00

as you either launcher continue to grow

25:02

your successful and profitable small business. This

25:04

is and Rilo Peasant. Thanks for joining

25:06

me on this episode of the How

25:08

A Business I Would he see every

25:10

Monday morning and you can find the

25:12

show any where you listen to podcasts

25:14

including the How A Business Youtube channel

25:16

or by website that How A business.com

25:18

Thanks for listening. Thank

25:21

you for listening to the How

25:23

of business! For more information about

25:25

our coaching program: online courses, channel

25:28

status, links, and other resources, please

25:30

visit ourbusiness.com.