How to know what you can afford to spend?
On Tuesday we talked about my magic spreadsheet that helps answer all kind of questions for my clients. It’s like a crystal ball that reveals the future!
But I have trouble getting clients to take it seriously — they frequently avoid engaging in creating one, and once built, it can sit unused.
Why? Well, here’s what I’ve heard.
My business just isn’t predictable.
Some business owners tell me that their business is too unpredictable to be able to forecast. “Brad, I just don’t know how many clients I’m going to win this year!”
When I hear this, I’m genuinely scared for this business owner. If you have no way to predict your business, then you should go to Vegas and throw it all on red at the roulette table. If you don’t know what causes sales what’s your strategy; hope and pray?
Predictability is success in business. The more accurately you can predict your future sales and profits the better you are at business. So maybe your prediction is not so accurate — that’s OK — your prediction with a plan is going to be better than no prediction and no plan, right?
If you’ve been in business for more than a year you can start with last year’s performance as a baseline. Each year is not a blank sheet of paper — unless you experience drastic changes in your business or market, this year will likely be a lot like prior years. So we can start by using last year’s numbers and then apply some assumptions about the changes you are going to make.
It all seems made up.
Yes, budgeting does involve making assumptions, guesses about what the future holds. But who’s going to know more about the future of your business than you do? Instead of thinking of it as a guess — think about it as an intention. This is what I’m setting out to do.
Most business owners have no problem “making up” sales goals (We’re going to grow 20%!”) When we make assumptions we are forming a point of view about how our business is going to perform.
It’s a lot of tedious work; I don’t really “do” numbers.
Most business owners didn’t start their business so that they could work on spreadsheets; I get that. Making a budget does involve spreadsheets, and numbers, and math. I’m guessing that isn’t what you are looking forward to doing on the first warm Saturday of Spring. But in business, numbers are one category of facts that you can’t ignore.
I argue that we also didn’t start our business so that we could constantly guess about how much we can afford to spend on office rent, or when to hire another employee! It is some work to create the budget, but a well-structured budget will give you more control over your business, it will provide you with some factual basis for making decisions, and it will help you to measure your business’ performance throughout the year.
Does it help if I give you the Excel file with the formula’s all filled out? (Really, click that link and download my magic spreadsheet!)
Leading by “feel” or leading by the numbers
I told you on Tuesday that most business owners that I meet shy away from this work, they prefer to run their business on gut instinct and deal with the inevitable car crashes when they come up. Is that you?
Or are you the business owner who can predict how their business is going to do in the future?
Do you want to know what your personal income is going to be this year?
Do you want to know when to hire, or get more office space, or make investments in marketing before the employees are quitting because they are overworked, out of space, and you are struggling for leads?
Are you ready to make a budget? On Saturday I’m going to walk you step-by-step through my process…
Start by getting the magic spreadsheet here.