Can you tell me how your business is going to perform next year? What about this year?
If you don’t know, be concerned, but not distraught. You should be concerned enough to care if you will be profitable, whether you need extra resources (staff and facilities) or things might be looking shaky and you may need to pull the belt in.
The reason why you shouldn’t be distraught – you are in the same boat as many small business owners.
Budgets are almost like 101 financial management, something that we often are taught or learn from a young age, but tend to take for granted when we look towards your business and its prospects.
From the Federal Government, all the way through to a child counting their pocket money, its important to understand what income you think will be coming in, and what you want to spend it on. This is budgeting.
Sometimes it is relatively easy to budget, perhaps if you are an employee with a stable income, you can fairly easily predict what is going to be coming in. And in terms of expenses, starting with what you spent money on last year is a good indication, then its just a matter of adding on some known expenses for this year, and removing the same from last year’s starting point. And of course, adding on a bit more to cover inflation (annual cost increases).
To assist with doing a personal budget, we often assist clients to identify just where the money goes. A great starting point is using an on-line calculator. We like the Count Financial Budget Calculator www.gnsgroup.com.au. We also like to track our clients progress towards their budgeted outcomes, and to do this, either an excel spreadsheet is handy, or you can let a program such as Xero take care of large parts of it for you.
Have a chat to our team to find out more about personal budgeting.
When it comes to a business, there can be a lot of variables which don’t always exist when trying to balance the household budget.
Income can fluctuate wildly for many businesses both on an annual basis, and also week to week. Whilst some businesses can have stable income, for many, their income fluctuations often fall into 5 main categories:
- Seasonality – not much ski hire happening in February
- Trends – a fashion retailer with red shirts, when white is all the rage this year
- Marketing – you may live or die by the success of your marketing on a frequent basis.
- Obsolescence – a video shop or film processing business
- Illness or Injury – a key team member (probably you) cannot contribute for a period of time and not adequately insured.
Being able to anticipate the outcome with accuracy, may be a real challenge in some cases, but its better to have a plan that may miss the mark, than carry on with your head in the sand ostrich style.
When it comes to expenses, there are often two types – Fixed and Variable.
Its not the same for every business, but as a general rule, Fixed Costs that you will incur regardless of how busy you are would include: Rent, Cleaning, some Wages, Phone & Internet, Loan Payments etc
Variable Costs, which fluctuate in line with how busy you are would include: Materials and Stock, perhaps some Wages, Delivery Fees, Repairs & Maintenance, Advertising, Equipment Hire etc.
The team at GNS Group can assist you in identifying the key drivers of your business, understand what your fixed/variable costs are, work with you to develop a budget (or perhaps 3 – a likely scenario, and a best/worst case scenario) and then help to track your business performance to these budgets.
For more information on setting a budget, or to get started, give the GNS team a call.