What Is a Budget, Really?
Would you ever get into a car and drive away with a bag over your head?
Of course not.
Driving with a bag over your head would be dangerous. You would have no idea if you are headed in the right direction. How would you know if red warning lights started to appear on the dash? Do you have enough gas to get to where you want to go? You would have no way of knowing if there was a bag on your head.
But let me suggest that that is exactly what happens when someone runs a business without a budget. Without a budget, how do you know if you have enough money to expand? You don’t. Are you on track to accomplish your sale’s goals for the year? Without a budget it is practically impossible to tell. How long will it take to where you are headed? You don’t know.
Not having a budget is the financial equivalent of driving a car with a bag on your head.
Far too often, small businesses have no clear idea of how they will get to where they want to go financially, and it is not hard to see why. They view budgets as necessary evil at best, or something to be avoided at worst. To them, budgets are restrictive plans that force hard choices and deprivation.
I think that part of the problem is the word – “budget.” It carries with it a lot of baggage. That is why a far better word to use is “plan.” A budget is really nothing more than a financial success plan for you and your business.
Your plan can be anything you want it to be. Do you want to spend more on advertising this year? Great. Make that a part of your plan. Maybe you want to spend less on labor. Fine, make that a part of your plan too. It is your plan after all. A good plan is a guide, not a noose.
And what is even better is that it need not be complicated or time-consuming. All you really need to do is figure out how much money you have available and decide how it will best be spent. A financial plan is an analytical tool that helps you allocate your resources the best way possible.
Best of all, creating a smart plan allows you to control your business’ finances and not the other way around.
© 2010 Steven D. Strauss, www.MrAllBiz.com