Photo credit: BUSINESS OBJECTS © Anatoliy Babiychuk
If your fiscal year parallels your wall calendar, then you made it through Q-1 or as you may formally call it, the first quarter. Perhaps you’re feeling optimistic about the goals you’ll accomplish this year, or are concerned about your revenue goals for the second quarter. It’s best to look at where you’ve been to figure out a great strategy for where you are going next. Here are four things you can immediately do to make the most of the remaining three quarters of this year in your small business.
1. Stick to your budget:
Not only do you need to stick to your budget, but you need to track your budget against what you actually spend each quarter. It is so important to prevent cost overruns before they occur. In fact, you should ask yourself Why three times, before making a purchase that is not in your budget. Keeping the numbers in your head is easy when you have one project, but not when you have many. Invoicing and accounts payable can easily become overwhelming. If you’re seeing success then add a stretch goal to your budget. A good stretch goal to consider is five percent of your figures.
2. Track Your Business Development Time
If you’re like most movers and shakers in small business, then you’ve spent a great deal of time this fiscal year building relationships, following up on leads, and hopefully closing contracts and sales. Remember to add up the time you’re spending on business development and use that number as a projection in your budget. Keep a daily timesheet to help you record how you’re spending your time on this critical marketing activity. Over the next three quarters, think about how much work you can actually complete in addition to your business development activities.
3. Track in Black, Red…. And Gray
Not only must you review your budget for revenue and expenses, but also, you must track the actual numbers. If you’re using a basic spreadsheet, include an actuals column next to your budget column so that you can record what you’re really spending versus what you budgeted as the year progresses. Be sure not to overlook the obvious growing pains associated with any business such as rework, rush fees from your vendors, process hiccups, emergency breakdowns of equipment, etc. In the area of marketing, remember that you have to spend to create opportunities to sell. This means that there should be monthly spending activity for marketing.
Your labor will often be a direct cost expense. Track your expenses closely and to think about what it takes to create and deliver specific products and services to your clients. You will also need to track your indirect costs, which support the entire business as a whole including admin, marketing and your professional services like accounting and legal support. Likewise, be sure you understand the difference between fixed and variable costs so that as you grow, you know how to budget expenses that will increase and decrease with scale.
3. Do Your Homework
If you’re new to budgeting, or are jumping back into business, the first place to start is within your own network. Begin creating trusting relationships with other professionals in your industry. This will allow you to talk with them about how they budget without revealing what you might consider trade secrets. You need the right answers, and ones that are based on data to manage your business. You need to know the following:
- How much your products or services cost in the competitive marketplace?
- How much companies like yours pay in expenses on average to operate weekly, monthly and annually?
- What is the standard timeline for delivering similar products and services?
- How much each supply chain component costs in similar companies in time and money?
- What is the standard profit margin?
4. Unless You’re A Magician, Leave the Rabbit Tricks Alone
Moving into the second quarter of your fiscal year can be a bit scary if you didn’t start off with a budget. The opportunity is now for getting your arms around your company’s financial performance. You’ll need to plan for revenues and expenses to better understand what opportunities to pursue this year. You’ll want to know how to price them, and most importantly you’ll get clear about how many opportunities you must win to turn a profit. When setting objectives, there is no magic wand to earn greater profits. Through consistent efforts you’ll do three things; increase revenue, fulfill your company’s mission and move closer to turning a profit.
Do you have any tips for establishing a budget once the business year has started? Please share you thoughts.
About the author:
Akia T. Garnett, MBA is a speaker, columnist for Minority Business Entrepreneur Magazine and CEO of Brandbuilder. She
is an adjunct professor of business, marketing and consumer behavior at Trinity University of Washington, DC, and Co-Author of Seen and Sustained: Best Practices in Communication that Increase the Visibility of Small and Diverse Businesses. Akia helps small business owners create, cast and complete vision and mission mapping exercises for their professional and personal brands. Learn more at http://www.BestPracticesforSmallBusinesses.com
I think it’s never too late to budget. If you captured the necessary numbers in the first quarter, use them to set your budget for the next 3 quarters. Consider what your one time expenses are that may effect one quarter not the other, and consider the nature of your business. Mine is professional organizing and the 1Q and 3Q are always busier with clients than 2Q & 4Q so I have to plan accordingly. I either cut my expenses in those two slower times or I have to find new and creative ways to improve income during that same time.
Debbie–
Thank you so much for your comment. You point about one time expenses is a crucial one. Its easier to use Q1 data to help construct a budget for the rest of the year.
To your business success.
Melinda
Great List. Definitely brings up some specifics that are easy to look over. I really appreciated #2 most. Those are specifics that people sometimes don’t know how to track/realize how important it is to. Thanks for the great advice!
Meredith–
I am so grateful that you left a comment. Akia highlighted some helpful information for everyone who needs to get on top of their budgeting process.
To your business success.
Melinda
Thank you very much, Debbie and Meredith. Your comments are appreciated. You’re right about it never being too late to budget, Debbie! You’re correct as well, Meredith. Tracking business development time is very challenging.
The timesheet concept, while so simple, is many times overlooked by small businesses. When the time is accurately recorded on the sheets reflecting how time is really spent, the budgeted numbers are easier to compare to reality which make them easier to forecast. Timesheets also help capture all aspects of labor, which is necessary for all other areas of the business planning.
ThinkBIG!
Akia
I suggest that no matter what month it is, it’s better to start the process rather than not do anything at all. In addition to the steps in this article, part of your planning for 2012 should include taking a look at what you project your revenue and expenses will be in the coming year. I have detailed information about Small Business Cash Flow Projection and Cash Management Strategies for the New Year at www.smartbusinesscashflow.com.