Thank you to Partner, Ron Lacy for sharing this article.
“In preparing for battle I have always found that plans are useless, but planning is indispensable.”
― Dwight D. Eisenhower
The last quarter of the calendar year is approaching, and many businesses will soon begin the process of creating next year’s budget. Almost every business owner “knows” their business needs a formal budget to guide them in the next year, and many feel guilty about not seeing the real value in preparing one.
Yes, everyone knows it’s great to have a written plan outlining how much you expect to spend next year, and what you think your revenues will be. But the budget process is so much more important than just the final document.
Notice I said the “budget process”. It’s the process of planning that brings the most value to you and your business. Done properly, budgeting forces the business owner to really think about such topics as:
- What’s my competition going to do this next year? Are they growing faster than us?
- Even if I’m growing my revenues, what’s happening to my market share?
- Can we really afford to keep doing “business as usual”?
- Will I need to arrange additional financing for working capital for next year?
- What clients/customers/product lines are really the most profitable, and which ones do I need to cull?
And, of course, the budgeting process naturally involves other people besides the business owner(s). Including senior leaders (and others) in the discussion gives them “skin in the game”, and can sometimes lead to serendipitous improvements.
So, preparing an annual budget is not just a “check the box” activity; it can really help drive your business to the next level of performance and profitability.