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Sweatshirts and Projections: It's That Time of Year

by Charity Wilder

Ahh.... Autum in Indiana. Time to throw on a sweatshirt, fix a nice warm cup of hot chocolate, and enjoy the changing of the leaves. Except if you are a small business owner or finance manager. If that is your title, you may also start stressing about comparisons, projections, the forecasted economy, and budgets. Most budgets are submitted for approval in the months of October and November.

Each year in my company, I look at where we are financially this year compared to last. How many clients have we had? What is the average ticket price? What are the costs of doing business this year versus last year? Has insurance increased? I also look at the cost of products and the effectiveness of each. These comparisons allow me to understand where we have spent and earned money in the past few years. It also allows me to see how changes have affected our business.

Once I know where we stand today, I can start looking ahead to where we want to be. Do I want to make $30,000 more next year or $2,000,000 in the next five? How do we achieve those goals? What are economists saying about the same time frame? Are new homes or buildings being built in the area we service? Should we expand or focus our service area? All these questions help guide my budget.

I like to think of my budget as GPS. Yes, like the GPS on your phone when you are visiting a new place. It is a great plan – and for many of us with a lead foot, it is a race! (Please don’t tell my police officer husband.) But just like when there is a crash, road closure, or a more fuel-efficient route, our budget needs to be able to take a detour or reroute.

There are some fixed costs and some variables in a budget. Most of the time, you know how much your insurance, loan payments (if you have any), and salaries will be for the year. However, the cost of materials will vary according to the types of jobs you secure.

At the end of my budget year, I like to look at my budget and decide if any money left over is best spent this budget cycle or saved. This is where I look back on my projections. If I want to buy a new fleet vehicle, I may save the money. If I plan to add a new employee next year, I may go ahead and buy gear. Afterall, everyone needs their own bucket on a belt, right?

Overall, your budget is how you guide your business. It is the GPS to get you to the retirement that you want. How you write your budget this year directly affects your checkbook next year. Budget wisely friends.