We have talked a lot in the last few weeks about ending this year strong. There are 19 work days left in 2018 and you need to make the most of them. But you also can’t take your eye off 2019, and one of the smartest actions you can take now to set yourself up for success in the new year is putting together your budget.
Now, we have all heard all the reasons companies say they can’t do a budget:
“It takes too long!”
“I can’t control everything in it.”
“It involves too many people.”
But the truth is you can’t afford not to do a budget. Simply put, your budget is your sales and spending plan for the year. When implemented right, it controls costs, forecasts revenue, sets goals, influences behavior, drives your team to action, and ultimately creates opportunity.
So where do you start? The better practice is to begin with the big picture and drill down, especially if you are new to the process. Pull together your data from 2018 and previous years, and then take the next four weeks to build your budget from that.
Week One. The owner and/or leadership team determines their 2019 goals. How much in sales do you expect to do compared to last year? How much gross profit compared to last year? How much net profit compared to last year?
Week Two. Ask each division leader to submit their division budgets. Be sure to ask them what investments—in trucks, equipment, products, and people—they think they’ll need to make to hit their numbers. We often hear companies say they’re going to double their sales, but that could also mean doubling your trucks, equipment, and people. Can you go from 10 to 20 trucks? From 30 to 60 people? Your budget needs to account for these investments too.
Week Three. The owner and/or leadership team reviews the divisional budgets.
Week Four. The owner and/or leadership team finalizes the complete budget.
Once you have your budget in place, don’t make the mistake so many businesses do of setting it and forgetting it. To really make your budget work for you, you need to consistently review it, looking at how you did in previous months and forecasting how well you’ll do in the future. The most successful companies review their budgets at least monthly—doing so gives you a quick pulse on how your year is trending and allows you to correct course if need be. If you aren’t hitting your sales goals, then you may need to adjust your expenses. If you’re growing quickly and your sales are up, you may have to increase your expenses to ensure you’re continuing to maintain standards and deliver quality.
Nothing matters in business quite like your financial performance. Put your budget together, work your plan, and consistently review and adjust to win in 2019.
Have a great week!
Vice President, The Grow Group