The end of the year may be a slow time for your business, or it may be a hectic crunch time. Either way, you’ve got some planning to do for the new year, and working out your budget is part of that planning. Here are a few things to consider:
Regardless of what the economy is doing, the general idea is for your revenue to increase each year. If your company is in the first few years of business, planning on revenue growth may be a bit shaky. When you’re the final decision maker and owner of the business, that’s your call to make, but when shareholders have a say, they’ll want to see revenue growth.
To set your revenue budget for the New Year, look back over your company’s history of sales. Have your sales increased year over year? If so, by what percent? When looking at a stable increase percentage, you’re probably safe to increase your budget by the same percentage for next year – or a bit higher if you want to challenge your staff.
When historical data isn’t enough, consider how you did this year. Was it difficult just to make the sales you did? If so, a modest increase over this year’s revenue is usually sufficient. Of course, if the New Year is bringing product launches, consider a more aggressive revenue goal.
Budgeting for Known Expenses
Consider the expenses that don’t change or change by very little each year to budget for your known expenses. Typical expenses include:
- Annual conferences, trips and tradeshows
- Banking and loan fees
- Office Supplies
Budgeting for Missed Opportunities
Before you add 10 percent to your known expenses and call it a day with your budgeting, take a hard look back over the previous year. Consider what revenue generating opportunities you missed because the budget wouldn’t budge. Specifically, think about:
- Local sponsorship opportunities you couldn’t afford
- New products or services you couldn’t launch
- Seminars and workshops you didn’t attend
- Staff you didn’t hire
With the exception of the perfect employee who may have slipped through your fingers, most missed opportunities are reoccurring. Some fundraising events come and go, and prices may vary year over year, but those fees you couldn’t afford to pay this year will give you an idea of how much extra you need in the budget for next year.
Budgeting for Success
The tricky part of any budget is ensuring your budgeted expenses aren’t higher than your budgeted revenue. If you’re in this position, go back through each of your line items and look for expenses you can cut from next year’s budget. Instead of deleting them forever, simply move them to wish list of sorts. If sales and cash flows are outperforming the budget when the expenses roll around, you might be able to move them off the wish list and back onto the budget.