Posted on 15/04/2016, 09:43
Owning a small business is not easy; having a good plan is a key requirement for success. Alongside your business plan, a well thought-through budget is a powerful tool.
A well-considered budget helps when making important decisions, and provides a baseline for determining whether a business is achieving its goals and objectives by providing a set of metrics to measure performance during the year. A budget helps businesses control expenses, manage inventory and cash flow, make key investment decisions, secure funding and attract investors / new partners.
Despite the important role a budget plays many SMEs don’t invest the time and effort to create and implement one. Some of the reasons business owners typically give for not having or using a formal budget include: “I don’t know how to”, “I don’t think it is a good use of my time”, “My business isn’t big enough” and “There’s no need – all the information is in my head.”
Here are 5 tips to help you put a budget in place:
Now look at your cost of sales, i.e the costs directly related to making a sale, and calculate your likely gross profit and gross profit margin. Gross profit is the difference between sales and the direct costs associated with sales and funds the business.
A working budget is one of a crucial set of tools in ensuring the success of your business. As Benjamin Franklin said:
“By failing to prepare, you are preparing to fail.”
In or last article, “Measuring What’s Important” we discussed key performance indicators or KPIs. There are lagging KPIs such as financial measures that tell you what just happened and leading KPIs that indicate what your financials are likely to look like.Read More
Following on from our previous blog in this series, “The Most Important Thing”, the next step is to translate your goals into action. For this, setting your targets and measuring your performance against them is vital to making them happen.Read More
What do you want to achieve in your business? Every owner manager had their reasons for why they started out on that journey – what are yours? And more importantly, are they still valid, are you on track, or are your hopes and desires being frustrated?Read More