As a business owner producing a budget is one of, if not, the most important thing that you can do. It’s a chance to project where you want the business to be in the next year and beyond.
Many agency owners ask us how they should produce a budget and our first advice is to always look at what has come before.
Starting the right way
Starting your budget by reviewing what has happened over the last 12 months is a great way to make sure that we are including all relevant costs, even those that only happen once a year, and being realistic about the levels of these.
This should give you a budget that is instantly realistic and achievable, and which you will have a real sense of pride in reaching.
Before you start adding figures to your budget you should look over the profit and loss account for the previous 12 months, in a monthly breakdown if you can get it, and scrutinise each cost line. Will you have that cost this year and will it be the same? Or does it change, either up or down?
It is important to be mindful of overheads that change on a regular basis – for example, Rates usually go up in April every year.
You should also look at the profit made in each month and ask yourself if that is enough to give you the quality of life that you need and to develop the business in the way that you want.
Once you have done that you are ready to start building the budget for the year.
What does this tell me?
By building out your budget starting with the profits that you need to achieve first, then your overheads, you are able to see the revenue that you require for the year.
Run this through your capacity planning tool to see if that is realistic with the team that you have, whilst being mindful of what you have already been able to achieve with the same team and if everything adds up, your budget is finished.
If it is not achievable with your current team you need to revisit the profit targets and the overheads to give more realistic targets.
Budgeting this way will help you achieve the goals for the company and take your agency to the next level.
We’ve helped dozens of agency owners to plan their future with clarity. If you would like help to build a budget that gives you achievable results then arrange a discovery call and I’ll be delighted to meet you.
