If you’re like me, you’ve gotten dozens of emails about why you should set up a budget for 2011.
The word “budget” often spurs a collective groan. It sounds so restrictive. Not to mention the effort that needs to go in to putting one together and the tediousness of all that number crunching. No thanks.
We agree. Coming from the Fortune 100 world, where the budgeting process could last 3 months or longer we are disenchanted with budgets too, especially because the numbers were often obsolete before the ink dried on the fancy presentation binders!
For nimble small and mid-sized businesses we believe in dynamic planning. Set a course and then adjust it to account for what happens throughout the year. Like a GPS.
Here are our tips for painless planning in 2011:
Think it through. A budget doesn’t have to be restrictive, but it does have to be thought out well. It should account for the 4Ms of your business, Money, Manpower, Marketing and Making it Happen. For more on the 4Ms see our blog post.
Keep it simple. Really, when you think about it, only a few major things change from month to month. Maybe it is payroll costs or marketing dollars, or adding in new sales from the client you just got. Changing a few line items makes updating a plan less cumbersome—and makes you more likely to keep it current.
Keep it current and use it to course-correct. Putting together a budget isn’t a once-and-done exercise. You need to keep it updated with developments throughout the year—monthly at a minimum. You’d expect your GPS to tell you when you’ve gone off course immediately, so too, a timely and updated plan will help you identify divergence from your expectations early so you can do something about it.
Ignore “Turn around when possible.” There are times that we know shortcuts that our GPS doesn’t. Despite the GPS’s protests to go back on the designated highway we might take some back roads instead. Do you throw your GPS away when this happens? Is it useless for the rest of the trip? No! Your GPS adjusts to your new course and eventually gets you to your destination. Maybe your plan you developed in January is off-base. Even if you’ve updated your plan monthly, your business may take a whole different course during the year. It’s ok to build the “short-cuts” into your plan, just make sure that you have laid out how you plan to get to your final destination.
Stodgy, restrictive budgets are so 2010. Start the new year off on the right foot with a flexible and plan that will guide you to success throughout the year.