Do you know the 5 ways to efficiently create a budget?
Create a real budget.
I would say that about 90% of the time clients come in with a huge budget made up of multi millions of profits. When you start to go through the line items, there isn’t any real back up to substantiate the numbers.
Instead there is always some hype about the product, the market in general, the most of all “the potential”. Banks and investors don’t want to buy your idea. They want to make a profit.
For them to believe in your idea, they have to “believe” there is a profit, so with very few exceptions, they are not going to invest in your “idea” if it doesn’t make sense or it feels too good to be true.
When you start your budget, make sure that every single line item has a reference behind it.
Real figures, real research - get down and dirty on it. For example, if you are providing a service and your budget states that you can sustain XX amount of customers per month at XX amount of dollars, then the price of the service will be easy to show given the average price of that service in your geographic area.
However, you need to back up why the customers would come to YOU versus the competition. That’s down and dirty, and you can’t get too detailed as long as your detail is short and to the point with back up.
I know that’s an oxymoron but think about it: when you are reading a budget, you don’t want someone rambling about their pipe dream. You want to know that the person understands what it’s going to take to make a profit and has a clear plan to bring in business.
You want details, but you want them to be short and concise.
That leads to the next point. For ANY business to be a success, the owner has to live, love and has hopefully learned from past businesses that they worked for that were successful, or learned from their own trial and error.
Yes, it’s ok that you made mistakes, as long as the lesson was there! I worked for a great CPA right out of college for five years to learn all I needed to know to run a business.
I still made mistakes in the first few years, but the foundation had been set and above all else, it was not an option for it not to succeed. It was my life, and whatever you are taking on must be your dream that you will move heaven and earth to make happen.
Once your budget is done, you can go back to it and pretty much reduce your income 25-50 percent less than what your due diligence led you to put on the report.
In twenty years, I have never seen a budget where the income was as high as predicted in the first year. This is critical because the lack of income in the first year is what causes 80% of small business to go out of business.
It’s imperative that you have money in reserves so that you can cover your bills the first year while you work towards a profit. It was hard enough to get your loan, but I promise you that six months into when you are not profitable, no one will want to loan you more money to get your though the next six months.
Just like income, you need to go back to your budget and take your expenses and increase them by 25-50 percent.
There are things that you underestimated no matter how meticulous you were, and there are things that you forgot altogether. Don’t take it personally – it happens to the best of us.
You want to make it through the first year and build a profit and you want to focus on marketing and bringing business in, so you don’t need or want to stress about finances. And let’s be honest – the more you stress the more you have financial problems.
Manifesting and building a business requires you, the owner, to stay in the highest vibration of success and belief in yourself and your new small business, and with the right budget, you will get the right amount of money from the right investor, giving you the freedom and confidence to focus on your dream and make it happen.
Bonus: Here’s a great link about small businesses that hits a few pointers of what to do after you get your loan and to keep from being a statistic.
Have a great week!