Only 40 days left until the start of a new year and a new beginning!
I outlined the first step is creating a budget for your business yesterday. If you missed it, you can catch up here.
By way of review, the first step is to create the income side of the budget.
This is a lesson that I learned the hard way, in fact, it almost cost me a career in the YMCA.
At a very young, and inexperienced, age I became the Executive Direct for a big operation that had a history of failures. I knew I could change things around.
Every year I came in with a positive financial report and a growth rate of 15% over the previous year, which is very respectable and something the organization had not done for the previous 20 years.
What should have been a cause for celebration, put me in front of the CEO in one of those conversations one never forgets. Everything was on the line from that point forward
The problem what that although I was coming in 15% over the previous year, I had been budgeting that I would come in 25% over the previous year and everyone was seeing a shortfall of 10%.
I had one year to change this pattern or my career was over by mutual agreement.
I’ll never forget the rest of this meeting. In short, the CEO and I agreed upon a strategy that I would budget to come in with a budget of 10% over the previous year. Then 15% growth would make me a rock star.
Creating a budget with (only) 10% growth was excruciatingly hard. I could not get the numbers to work. Until, I looked at the income first, which was, of course, the CEO’s recommendation when I humbled myself and asked for mentoring.
To this day I’m not sure what the theory is behind why it worked, but it did!
A lot of it has to do with keeping the expenses in check.
When we start with expenses, we tend to enthusiastically, and without solid reasons why and inflate the income unrealistically to cover the increasing expenses.
Start with the income and you avoid this financial death-trap.
The second step in budget preparation is to carefully examine the income numbers you have assigned to each month of your budget. Compare them to the last three years. Ask yourself the tough question. Why do I think this will happen? Do I currently have the resources I need to make this happen?
And the biggest question of all, what additional resources do I need to achieve these numbers? What will they cost? Is there a better way to approach this opportunity?
There is a cost to everything and sometimes it’s more profitable to temporarily shave our expectations a little in order to get things done more inexpensively and in the end, profitably.
This thinking process is your next step in budget preparation. Have fun with it.
Budgeting this way set my Y career on fire. We came in at 15% like usual, but now everyone saw the 5% overage. The celebration party was so much fun and the Y started on a path of explosive growth.
You only get results if you take action on your ideas. Do it now!
Ron (set your budget up right) Gordon
