Building A Business Budget
Carrie has been in business for 5 years, and still doesn't know the best way to make a budget for it. What does Dave tell her?
QUESTION: Carrie wants to know how to create a business budget when you don’t know when money is coming in, and how much it will be. She sells small home repair services.
ANSWER: There are 2 or 3 things that affect your ability to budget accurately. One of them is how long you’ve been doing this. If you’ve been running the business for 5 years, you should have a clue. You should know what the cash flow around your business looks like, and how it is around certain times of the year.
Another thing to ask yourself is what the lead time is on your products. Is there no other way to predict it other than seasonality and the business you did last year? The third aspect is marketing so well that you have work backed up.
You have to do some things to stabilize your cash flow and make it more predictable. You are living from panic to panic, and that is a matter of your marketing and your business model. If you are trying to generate $50 handyman calls, then you have an entire different business model to grow than if you try to line up $1,000 jobs.
Think about the widget that you want to sell, why you want to sell it, and how you can get enough of that flowing to get people standing in line. It sounds like you’ve jumped around on that, and that’s all right, but you should designate what percentage of your jobs are small and which are large.