As if managing your personal finances wasn’t enough, if you are an entrepreneur you may be asking yourself, Sarah are you kidding? Now I need a business budget? You know my answer is going to be yes because I believe in the power of the budget but also you absolutely need a business budget if you want your business to be sustainable, profitable and actually be successful in the long-term! But what is a business budget and what can it really do for you and your business besides tell you where your money is going?
Reason #1 to have a business budget: Optimize expenses
As a small business owner, it is super easy to get distracted by new-shiny-object-syndrome with all the online courses, new software, products and services out there specifically targeting you and telling you that whatever they are selling is the key to creating more success and more money in your business. And then what happens? You end up spending oodles of money on programs, the recommended software and all this gear and you are then underwater in your business because you overspent on support products when you weren’t bringing in enough revenue in your business to support it.
Understanding and being deliberate about your expenses is a key factor in making sure that your business is profitable. You can be bringing in a ton of revenue but if it’s all leaking back out via your expenses then you don’t really have a sustainable business. Just like with personal finance, the key is not to simply increase revenue/income but to really hone in and optimize your expenses so that you can make the best use of the revenue you already have. A budget will help you do that!
Reason #2 to have a business budget: Helps determine if your business is revenue generating or profitable
I have news for you my friend. You can be bringing in revenue (money) in your business and still have a business that is not profitable. These two things are not the same. It is a common misunderstanding about business finance. Let me break it down
- If you have a “business” but it isn’t bring in money = hobby
- If you have a business that’s bringing in money but is not keeping money in the business = dying business
- If you have a business that’s bring in money, keeping money in that business for the future = profitable business
I’m sure that your goal is #3, right? There is nothing wrong with having hobbies – just don’t call them businesses. If you have a dying business that you don’t believe you can make profitable, turn it into a hobby and move on. If you want a profitable business, you need a business budget.
A strategic business budget tells you whether you are not only bringing in money but whether that money is being put to use properly in your business – for taxes, expenses, savings, growth and take home pay, which leads me to…
Reason #3 you need a business budget: Paying yourself a salary
You deserve to take a regular salary from your business. As an entrepreneur it can be hugely tempting to dump all your “profits” back into your business thinking that is how you help it grow. Stop it. Stop it right now. You are going to burn yourself out! Every dollar you make in your business is revenue, not profits. Once you earn that dollar it gets divided up by expenses it took to create your product/service, taxes, savings (yes you should be saving in your business – hello COVID!) and you should absolutely be taking a cut of that dollar for yourself as pay.
There is no faster way to burn yourself out and start to resent your business than to fail to pay yourself an appropriate salary. I mean, you started this business likely because you wanted to impact the world but you also wanted some time and financial freedom, right? You deserve that.
By creating a business budget you can make sure that you are including yourself in your plan for creating that profitable and sustainable business. I mean, without you, there is no business so sustaining your ability to be your business is pretty important.
Reason #4 you need a business budget: Strategic pricing support
Pricing is one of the toughest things that many entrepreneurs struggle with. How to price things in a way that supports and sustains their business and that people will actually pay for.
I have more news for you. If you are basing your pricing on what you think people will pay instead of what you need in your business based on your budget then you are setting yourself up for failure. That dying business we discussed earlier? You are headed there my friend.
People will pay top-dollar for a high value product. If your product/service stinks then yes, no one will pay for it. If it is stellar then stop short-changing yourself and raise your prices to what you need to make your life and your business work. Deliver the quality to match the price.
People’s concept of value is completely relative – and you cannot know how anyone else values anything. This is exactly what I teach my students in Bulletproof for Life, pricing is subjective so stop trying to assume that you know how people will respond to your prices. Charge what you’re worth and deliver that quality and quality clients will pay for it (and those are the only kind you want anyway right?)
You have to have appropriately priced offers in order to have a sustainable business and the only way to know for sure is to have a business budget that tells you whether your just offers at your current sales levels are bringing in the right amount to sustain and grow your business based on the numbers.
Ready to get going?
If you don’t already have a business budget that is doing all this for your business – are you ready to get started? Get instant access to the Bulletproof Business Budget Template by clicking the link below to get started today
Want more hands on support and someone to do it all for you? Book a Bulletproof Business Intensive and get a bespoke business budget done for you in one day.