Better Business Budgeting for 2019

By the time Santa is checking his list twice, business owners should already be getting ready to make 2019 nice! A pivotal piece of making sure we hit the ground running in the New Year is preparing a comprehensive budget for the company.

What is a budget? Think of it as a crystal ball for the outlook of your company’s finances over the next 12 months. It starts with an estimate of 2019 revenue, usually broken down by month. The next step is to list out all the main expenses; starting with cost of goods/services and then rolling down to the other expenses such as salaries, marketing, insurance, etc. Once each of these are estimated, the result is the company’s net profit for 2019!

Budgets can become very complex and detailed – especially if you want exact numbers. A quick and easy hack? If you’re willing to endure some margin of error, a simple way to estimate your expenses in the new year is to take the percentage of revenue for each expense in the prior year and apply it to the new revenue figures.

For example, if your total revenue was $100 in 2018 and you paid $15 in sales commissions during that same period, you would apply 15% to the 2019 revenue to get an estimate of what your 2019 sales commission expenses would be. To conclude, if your 2019 projected revenue is $150, then your estimated sales commissions would be $22.50 ($150 x 15%).

It is important to remember that your budget is meant to be a quick tool that you can use to see if the company is on track for the year. It is NOT meant to be a rigid construct that inhibits a company from making an important strategic decision.

Don’t forget; the only thing that is 100% certain with any budget or projection is that it will inevitably be wrong!!