BUSINESS TIPS FROM THE EDITOR January 2024
Richard T. Hendee, Editor
The Silver Fox Advisor
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Last month’s Business Tip outlined the reason for doing a 2024 Business Plan. This month I want to discuss the other key element of an annual business plan, and that is an annual budget.
Annual budgets are a good way for a business to stay on track financially. Like creating a business plan, if you have never done an annual budget before, it can be a challenging task, but once your budget template has been developed, each year gets easier to complete. The budget process should start with an annual forecast and then be broken down on a quarterly or even a monthly basis.
A budget should not be something that is done at the beginning of the year and then not looked at until the end of the year. The budget needs to be monitored and measured vs. the actual results on a quarterly or ideally a monthly basis. As an example, if advertising was budgeted at $20,000 for the year and after the first quarter the actual advertising expense was $15,000 that leaves only $5,000 for the rest of the year. That may be O.K. if that is your business cycle, but most businesses typically advertise the entire year. In this case, to stay on track with your budget you may need to look at some of the other expense line items where you can move some funds into advertising. Or, maybe the additional advertising dollars spent in the first quarter generated additional unplanned revenues that more than offset the additional advertising expense.
Another point I would like to make regarding the budget process: The budget almost never will match up exactly to what the actual results will be. If you try and create a budget that does that, you will be beyond frustrated. The budget, like the business plan, is a road map to guide your business during the year. Think about the last big trip you took. You planned out your route, but as you actually did the traveling, you ran into a detour that took you off your planned course. You probably pulled over and determined a side course that you could take to get you back on track. That is exactly the process you should follow when monitoring your business plan and budget throughout the year.
One final thought. Without a formal business plan and budget, you and your business will likely not be as successful as you would like or as you and it can be. Getting up in the morning and going into your business without a plan and budget, you will probably find yourself putting our fires and chasing shiny objects all year long and ending up at the same place you did when the year started, or just maybe behind where the year started.
Is this the year that you do something different and create that business plan and budget? If you need help or assistance, we encourage you to visit our Web-site at www.silverfox.org and learn more about the Silver Fox Advisors, and how they can assist you with your business needs, as well as discover more about our great programs and community outreach endeavors.
