Raise your hand if you were brought up budgeting with white envelopes? Ok I’m the only one. I love a good budget. But since starting Morether, budgeting hasn’t been as easy as it was with a $1/month allowance.
With a year like 2020 behind us, budgeting is even harder.
I’ve asked my accountant and client Michael Rousell of BGFN his thoughts…
“The key to a successful budget is consistency and preparation. Use 2020 as a lesson that we have to be prepared for anything. Tell your money where to go instead of allowing your money to control you.
If possible, use your past to plan the future. First, identify your fixed costs. Next, write down variable costs. Finally, create reserve accounts for extraordinary items that may come up [aka 2020]. If you’ve had two years in a row with the same “event”, that event is no longer an extraordinary event. It should be in your budget as it’s likely to happen again.
In light of 2020, use 2019 year as a starting point, then adjust expectations for items you know will be affected by the pandemic.”Mike Rousell, BGFN
Great advice, Mike.
But what if I’m a young business and forecasting my income is nearly impossible?
I heard that. We’re a 3-year old company that’s still evolving. I get it. Budgeting feels useless when income changes all the time.
When the world shut down, I heeded wise counsel from marketing guru Donald Miller. He and his team produced a plan that included forecasting revenue and expenses for 90-days. Our team did the same thing. I loaded up a spreadsheet and hacked away. We had a decent picture of revenue and I knew from past data (thanks Mike) what our monthly expenses would be. I had no idea what the year held, but I could do 90 days.
The result? We’re still here! It didn’t look pretty but knowing where we stood and what we needed to adjust helped me sleep. Our company will continue that habit even when the pandemic fades.
Before our “Roaring 20s” continue into ’21, take time to map out Q1. Use 2020 and 2019 as a starting point to get something on paper.
Budgeting is a plan with numbers. Ben Franklin said, “By failing to prepare, you are preparing to fail.” 2020 took us off guard. As small businesses ($0-$10million+), we can and should do better for our families, employees, and communities.
I asked a few friends for their thoughts. Art Coley, the CEO of CGI Franchise offered a few nuggets of wisdom as well.
You have to know what you’re doing this for–your “why”.
You have to be brutally honest with where you are today. Where are your real gaps and where does the business stand, right now, today?
Finally, be courageous and bold to get an immediate plan. Be maniacal about implementation, execution, and adjusting to meet the desired state.
It’s that simple.Art Coley, CEO CGI Franchise