Budgeting has a bad rep.
As something that controls what you do and makes you feel less than abundant.
I can see why this is the case for those of us who’ve worked in corporate where budgeting is seen as a control mechanism and a way of measuring performance. That you can only spend what is in your budget or that you need to make so many sales to keep your job or get your bonus.
While it may feel necessary in a bigger organisation to use a budget in this way, you don’t need to use it this way in your small business. Rather it can be a great way to help you plan and make decisions in your business.
Because for a small business, a budget is really just a plan. And just like any plan you can amend it or throw it completely out if things change and it isn’t serving you anymore.
When you are a small business, the way I like to see a budget being used to is to align your money to your goals and helping you set meaningful goals.
Some myths I want to bust around budgets:
1. You have to do a budget for a year. There are no rules on how long your budget has to go for. A yearly budget makes sense in many ways, because some business expenses only pop up annually. But if doing a quarterly budget feels like a great place to start for you then do that. It’s about getting in the habit about planning what is going on with your money in your business.
2. You can’t make adjustments. Even corporates make adjustments to their budgets. Because things change. There might be a pandemic, you might decide to pivot your business or your business model, you might be doing so well that it’s time to make some more investments or pay yourself more. You can make adjusts or create a whole new budget.
3. It has to be specific. Yes you might want to budget for a specific training course that you want to do. But I know that things pop up during the year that I wasn’t aware of when I did my budget. Or I identify something I want to learn that I think will make a difference in my business. So instead I have a training budget that is a combination of specific training I want to take and then a more general amount for things that I didn’t know about when I first set my budget.
I also like to have an amount set aside for unplanned things – a bit like having a contingency if you’re building a house. In case something goes wrong or just to cover things that I forgot to budget for.
4. You have to stick to it exactly. A budget is only an estimate. You aren’t going to know exactly what is going to happen.
Maybe you have a more successful launch than you planned and can invest in that new branding.
Or your laptop died and you need to get a new one. (It makes me very nervous even typing this on my ageing laptop.)
Maybe you’ve budgeted for a new camera for your photography business and just as you are about to buy a new model comes out that costs a couple of hundred more than you planned but it has some wonderful new features that you would make your photos extra special.
It doesn’t mean you can’t buy that laptop or camera (I wouldn’t have my business without my computer). It’s about being mindful about where your money is going. It can help with that shiny object syndrome.
If something isn’t in your budget then I like to think that the budget may help you stop and pause and make a decision around the purchase based on what you want to achieve in your business. Rather than some of the more pushy marketing tactics that are out there that fill you with FOMO.
It’s all about making decisions that are in alignment with what you want.
Too often we only see the numbers and accounting in our business as what we need to provide to the tax man. When they can be wonderful tools to help you run your business.
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