We all wish we had access to unlimited funds to grow our businesses. But, unfortunately, 99.999% of the time that isn’t the case. If you’re part of the 0.001% (I’m talking to you, Jeff Bezos) that doesn’t have to worry about where your money is coming from, this article isn’t for you. For the rest of us, budgeting our business is something that has to stay at the forefront of our thoughts (and prayers).
Build the right foundation
Think of your business’ budget as its foundation — without a solid foundation, everything starts to sag and fall apart around you. You’ll notice a wall starting to crack, a slight dip in the floor, a window that doesn’t open or close as easily as it used to. Next thing you know, you have plaster in the floor (that possibly now has a hole in it) and your electric bill is through the roof (which is leaking, btw). Proper regular checks and maintenance of your foundation could have prevented all of this, but now you’re starting at thousands of dollars in repair bills. Your budget is basically the same way, regular checks and maintenance can prevent potential disaster later.
Set your budget at the first of the fiscal year, but I always suggest checking it and making any necessary adjustments once per quarter. I’ve come across several small businesses that set a budget when they first opened their doors and never looked back. 3 years and a lot of headache later, they can’t figure out why their customer base isn’t growing and the rent check just might put the bank account in the red. In a desperate attempt to “save the farm,” the business owner looks at the budget to figure out where to squeeze out a few more operating dollars. Office supplies and “business lunches” are eating up a huge chunk of money every month, and the marketing budget hasn’t been adjusted because it doesn’t exist. That evening, the owner is on Facebook asking friends for free marketing ideas and feeling even more stress because s/he is realizing that old saying is true: Nothing in life is free.
By watching your budget and making a few little adjustments here and there, you can have the money needed to bring in the customers. Of course, adjusting your budget means adjusting your everyday operations. For example, in my budget I’ve been able to almost completely do away with office supplies by transitioning over to a paperless office. I still have an all-in-one printer just in case, but it only gets used once every two months or so. Doing this has saved me $150-$200 per month just in paper and ink. Also, I’ve saved money with this because I don’t need to buy another file cabinet. Although that may seem like a small amount to save every month, those pennies add up. That $150 can now go into my marketing budget to bring in more clients or, if needed, can go into the pot for a desktop computer upgrade.
Robbing Peter to pay Paul
The more you shift your numbers around, you’ll realize that budgets are really nothing more than taking money out of your right pocket to put in your left. It’s all your money and it all moves in and out of the same account, but it’s all about how you spend it. No doubt you’ve seen this in your home budget: if you’re saving for a vacation, you have to pull that money from somewhere so it may come out of the extra money you have to eat out every week. You know you have certain constants, such as utilities and mortgage/rent, so you can’t touch those. Other expenses, though, are flexible. A business budget is no different… you’ll have fixed expenses and flexible expenses. Pay the fixed expenses first and then adjust the flexible expenses where you need to. If you take the time to study your spending habits and budget limitations, you’ll be surprised at how much flexible spending you really have every month.
You may be able to switch over to a paperless office. There may be an item in your inventory that you don’t need to restock because the 5 you have are still sitting on the shelf and collecting dust. Employee hours and store hours can be adjusted to maximize your savings. Something as simple as adjusting the thermostat to lower the electric bill can make a big difference. Take the time to study every line of your budget, asking yourself “Is this a want or a need?” If you’re brutally honest with yourself, you may find that a majority of your expenses aren’t needs, but only convenient money wasters. Be sure to look for subscription services that are set up on autopay… It’s not uncommon to find one or two of these that are lingering around even though you haven’t used that service in a while.
Change with the seasons
For many small businesses, income and expense changes with the seasons so you want to keep in mind what you had this time last year vs. this year. Do your sales drop for a while at the beginning of summer or around Christmas? Watching these trends can greatly benefit your budget because you’ll be expecting the changes in income and can adjust your budget accordingly. I have a client that dealt with this problem for years until we finally figured out her company’s sales trends. The business would always suffer in June and August, year after year. It turns out her customers were planning family vacations the first two weeks that school was out for the summer, and then spending their time (and money) getting ready for the kids to go back to school in August. The solution? Take a much deserved week off during these times to offset the loss of income. After all, there’s no point in being open if there are no customers.
The takeaway
Every business’ budget is different, and it needs to be adjusted to fit the needs of that particular business. Take the time to study your budget every quarter, and make sure you’re doing away with the wants so you have more money for the needs.
As always, if you are having trouble reigning in this or any other problem your business is dealing with right now, feel free to get in touch! I’ll be glad to meet with you and help.