At the end of each year many business owners take stock of their businesses. This is the season when we all begin to compare what we achieved against the goals we set at the beginning of the year. Many of us would have revised our goals upwards or downwards as the year went by. Many of us would have taken stock mid year and put strategies in place to make sure we achieved the goals we set at the beginning of the year. Some of us would have taken the “I can’t kill myself attitude jare” – well don’t feel bad, I decided to take that attitude as well with some of the goals I set in January while for some I changed gear and took the bull by the horn and fought to make sure that I achieved some of the goals. We all get ambitious at the beginning of the year and rightly so.
As a business, budgeting and planning should be an exercise that is done latest by the fourth quarter of the preceding year. This means that your plan for the next year should be well under way now. Planning and budgeting should be an exercise that also involves all departments and everyone within an organisation as this would enable everyone to know what is expected of them in following year.
Successful corporations spend time budgeting and planning for at least 3 months, successful organisations do not happen by chance, it takes planning, budgeting because this allows them to plan for the necessary resources for them to succeed the following year. In Nigeria, most of us spend time criticizing the government for not releasing the country budget early but a lot of us run our businesses without a budget or a plan.
A few tips to consider when budgeting or planning include;
1. Have you analysed your revenue, cost of sales, other operating costs for the current year?
2. What amount of your operating costs was spent on marketing and advertisements?
3. How much extra revenue did the marketing and advertisement cost bring in, or how many new customers did our marketing cost and strategy bring in?
4. What were the things we did in the present year that has helped increase our profitability?
5. What are the opportunities that came that we couldn’t avail of because we didn’t have the capital, what plans can we put in place to mitigate this in following year
6. What were the things we did that increased our costs in present year and what can we do to reduce costs?
7. What were the things we did that worked to increase revenue?
8. Who were our most profitable customers in the present year?
9. What were our most profitable products?
10. What products are loss making and we should consider cutting or what can we do to increase the profitability of these products?
11. What customers are not worth the effort? – some times the ones that buy more are actually loss making because maybe you spend more to keep them happy or they are the ones who don’t pay on time.
After doing the analysis above and more as it affects your business, then you can set out to make a plan and come up with a budget and target on things like;
1. How much revenue as a business we want to achieve next year
2. What level of increase we want to see in our customer base
3. What extra line of products do we need to bring in
4. How much should we budget for marketing
5. How many more staffs do we need in order to grow to the level we are targeting in the following year
A planning and budget exercise is as much quantitative as well as qualitative. The things mentioned above will serve as a starting point.
Honestly, if you a small business owner I would advise that you hire a business consultant to get this done for you yearly as it can be time consuming and a small business owner is already juggling so much. If you outsource it, you can spend more time growing your business.
One last thing, if you do not have a plan, budget or road map – what would be driving you in following year and how would you be able to measure how successful your business is in the following year. However, make sure you have measured the present year as this will give you something to measure the following year against.