As Albert Einstein said, “A person who never made a mistake never tried anything new”. We have seen and made ourselves over the years mistakes when it comes to budgeting for the first time, so we’d like to share with you some of the biggest traps to avoid.
1. Treating a budget as a onetime or once-a-year exercise. Your budget is a living working document that you use to run the business day to day and make better decisions. Often we see people create a budget to obtain bank funding and then put it aside and not consult it again. Instead the document needs to be reviewed and updated regularly so that it can be adapted to achieve the end goal.
2. Making the budget unrealistic or lacking in the right amount of detail. It is great to aim high, however, your goals also need to somewhat realistic and achievable. When setting targets you need have some methodology and a plan to hit the numbers you have projected. When establishing targets for revenue growth work back to the number of leads, your conversion rate and customer spend to assess how feasible your targets are and determine the amount of activity you will need to produce the desired result
3. Failing to ask for help. We’ve found that a substantial number of people go into business because they love what they do, but finances are secondary to them. If their business seems to be ticking along ok they won’t adopt a formal budget, which may be due to a lack of time or the thought of numbers is overwhelming. Seeking assistance from a financial or business advisor to help prepare a first time budget is a great idea. After the initial budget is drawn up, many business owners can then do the monitoring and updating themselves each year.