It’s a common trap that small business owners fall into, including myself—we try to create the “perfect” budget. But nothing is ever 100% accurate when it comes to financial planning. Instead of seeking perfection with your budgeting, aim for consistency.
Watch my video or read below to find out more!
The Allure of High Turnover (and Why Profit Matters More)
As business owners, many of us set goals like “I want to achieve £1 million in turnover.” However, a high turnover does not necessarily translate to profitability. You can have a million pounds come through your doors, but how much of that is left over after covering expenses? Understanding your gross profit percentage is key, as most successful and profitable businesses have a strong handle on their gross profit margins. Know your numbers!
Use Budgeting as an Accountability Tool
Review your budget versus actual financials on a monthly or quarterly basis. This regular check-in allows you to understand why discrepancies exist between your projections and actual results. It also serves as an accountability mechanism to prevent overspending—a common issue for some business owners who get carried away reinvesting every pound into the company.
Align Budgeting with Personal & Business Goals
Your budget should align with and help you accomplish both personal and business goals over the next 1-5 years. Do you know exactly where you want your business and life to be in the future?
What would it look like if money was no object?
Ensure your financial planning maps to these visions. Budgeting is not just about the money, it’s about enabling the life you want.
Working Backwards to Set Targets
When creating an initial budget, work backwards. Start by determining your ideal take-home profits and investments for growth/wealth. Gross up the required profit levels for tax obligations. Then calculate the overhead expenses and gross profit needed to reach those final profit goals. This will dictate the required sales levels and revenue targets to work towards.
Embrace Course Corrections
Revisit and flex your budget over time as new opportunities or challenges pop up. This is very normal—no financial plan ever goes exactly according to plan! Business is messy and dynamic. As long as your budget gets you closer to your goals, minor changes are perfectly acceptable and expected. Stick with the consistency of reviewing and adjusting.
In summary
Budgeting perfectly is an unrealistic goal that causes undue stress for business owners. Instead, focus on consistent and regular budget reviews, understanding variances between projections and actuals, and course-correcting when needed. Let your budget guide you toward accomplishing personal and business goals.
If financial planning seems daunting, enlist help rather than go it alone. I’m happy to offer a free 30-minute discovery call to see if I can help put your budgeting on the right track. Click below to schedule a no-pressure session and get expert advice tailored to your business situation.
