Tag: budgeting

Planning over budgeting

~ C.O.R.E. Beliefs ~ Leave a comment

Somedays it feels like all we do is parse semantics, doesn’t it?

Budgeting, planning, it is all the same thing, right?  Well, no – not really.  Yes, far too often they are used interchangeably, but the truth is that planning is far more important than budgeting.  Budgeting is really about allocating your resources.  Planning identifies what you want to accomplish and how your resources can help you make that happen.

This is why the distinction is important.  I am starting to help clients plan for the next year and part of that is looking at what we have accomplished through today.  It is part looking at the numbers and part looking at the strategy and seeing if we are off target.

To me, there is nothing worse than not being able to answer the question, “How did we get here?”  Or worse, hearing the glib answer, “We performed well (poorly).”  Duh.

What was the plan?  Did we think we were going to break into a new market?  Did we succeed?  What is the acquisition cost per new customer?  Are we getting repeat business?  Can we grow in that are?  At what cost?

There is nothing harder to do than listen to someone say how profits are holding steady, while knowing that it is because money is not being spent on carrying out the plan.  Of course you have profit, we are not spending money on project X, which, by the way, two years ago we all agreed that it was going to be the flagship product within 5 years.  Why did the company plan to allocate thousands of dollars on advertising if we don’t want to spend it?

These are hard questions to listen to, much less respond.  No one likes having their parade rained upon, and yet, well, there it is. The plan drives how resources are acquired and spent, otherwise you just have a budget.

That isn’t to say budgeting isn’t a useful tool, it is.  But my experience has been, budgets are typically devoid of planning.  We spend money in that area last year, lets continue to spend money in that area.  We generated revenues selling widgets last year, lets budget to generate 5% more in sales.  There is no plan, no vision, nothing to be held accountable to until it is too late.

I do lots of budgeting for non-profits and the most fun I have is helping them rethink the budget process into the planning process.  We start by looking at the big picture and then start asking how we get there.  Then, once we get consensus, we start putting numbers to actions.  It is extremely rewarding to see these professionals see the results and understand that there is a reason for spending money, other than the satisfaction of having money to spend.

So take time, do planning.  Think about where you want to be and how you want to get there and THEN allocate resources.  You will get tremendous benefits from it, mostly from thinking about how you are going to get from A to B.  If you need help, let me know, I am always open to helping companies and non-profits think about their plans and how they translate into action and money.

 

Thoughts on Marketing

~ C.O.R.E. Beliefs ~ Leave a comment

Happy Wednesday.  You know, I am typically not much for working out in the evening – I prefer reading and drinking wine – but it does help me sleep much better.  Still a little sore from last night’s routine, but I slept like a rock!

Kubae and I were talking this morning about a restaurant that started and died a few blocks away.  It lasted about 2 months before the doors were closed.  she wondered what they might have been thinking and what lessons we could learn from this.

I think there are several important lessons for anyone starting a business in this story.

First, the old adage, “If you build it, they will come” is no longer valid.  I am not certain there ever was a time you could open business and customers would flock to your doors, but it definitely won’t work today.  Today, your potential customers have a huge array of choices so a small business owner must find a way to get to “top of mind”.  This means marketing.

Second, as I discussed in a prior post, the saying, “Location, location, location” is extremely important for certain types of small businesses, especially restaurants.  In this instance, this restaurant might have had the best Chinese cuisine in the Pacific Northwest.  It wouldn’t matter as it was sandwiched between two other restaurants and on a side street.

Third, whatever you think is the bare minimum you can spend to get the word out, triple it.  That’s right, plan on spending 3 times as much on marketing than you originally anticipated.  Your potential customers are bombarded with thousands of choices a day and your small business competes with those other messages.  Whether you choose to spend money or time, a conservative approach is to plan for more messaging.  A lot more.

Fourth, when in doubt, spend more on marketing.  A good friend of mine, Mike Leitch of VSource Systems, used to joke that the biggest problem he would like to see is having more work than he has time to do it.  With a growing business you can hire to handle the extra work; but if your business never gets going, you will be hard pressed to pay yourself.

Fifth, change your marketing channels.  The first thing you need to do is ask yourself how anyone is going to find out about you.  If you are a restaurant, you need to find out how to get listed on Yelp and Google Maps and any of the other dozen websites that cater to restaurant reviews.  If you are an accounting business you will need to find out how your potential customers look for new accountants.  And then, ask yourself, what other ways can I get the word out.  Experiment with channels, track their effectiveness and if after a few months it isn’t working, discard it for now and try something else.

Starting a business is risky.  If you are ready to take the plunge, then I strongly suggest you create a marketing plan to help you build excitement about your Company.  And if you are looking to expand your business, I strongly suggest you create a marketing plan to help you build excitement about your Company.  Getting more potential customers than you have time to work on is a great problem to have.

If starting a business is in your future, I encourage you to reach out to your accounting professional and create a business plan and budget to help you get through the first 3 years.  If you are looking for an accountant who can help you plan your startup or would like another opinion, feel free to contact me for  your free no obligation consultation and lets see what we can do to help make your dream come true.

Have an awesome Wednesday.

 

Budgeting

~ C.O.R.E. Beliefs ~ Leave a comment

Happy Thursday and Mid Year!  It is almost the 4th of July weekend and we are so excited the boys are coming tomorrow to play Xbox and enjoy our homemade individual pizzas.  It is always a great time.

Kubae and I went shopping last night.  This in and of itself is nothing extraordinary, but it is the first time we went shopping based upon a budget.  Why a budget you ask?  It seems she reads my blog and felt that we should plan for the things we want.

Since we are like almost everyone else in the world (especially like most small businesses) we have limited resources – meaning that we cannot have everything we want.  So we sat down over the weekend and did some strategic planning.  She wants to take a trip out of the country next year.  This was our primary goal.

Now, the fun part became, how do we get there from here?  This is where budgeting comes in.  A budget is the plan to get from where you are to where you want to be.

First thing you have to do is have a good idea of where you are.  So, I downloaded 3 years of bank information, dumped it into Excel and started categorizing.  I actually use 4 overhead categories for our personal finances, similar to what I use for small business – Facility, Food, Entertainment and General.  After 3 hours, I had a good idea of how we spent money.  From here I crafted a few alternative budgets for our upcoming discussion.

Tuesday night we had our “Board Meeting” to review our expenditures and our plan.  It was very enlightening and Kubae immediately dug into the details.  Part of the historical review is that it really puts somethings in perspective, such as $500 a month on eating out.  Having the history made it much easier for us to ask questions like:

  • Why do we spend money on this category?
  • Is there an alternative?
  • Do we impact our quality of life if we redirect the funds to another purpose?
  • How does this spending get us to our goal?

Based on this conversation, we were able to move into the various budget proposals.  We reviewed each category, moved money from one area to another and made a commitment to the plan.  Which led us to last nights shopping trip.

We spent a few minutes creating the list and a rough idea of what we would spend.  We allotted ourselves $60 for last night’s shopping.  We completed the list and added a few things we had forgotten and the total came to $68.  Victory!

I know, you are thinking, but you exceeded your budget so how is this a victory?  The answer is, we typically would walk out with over $130 of food and goodies.  We were able to cut our typical shopping experience in half.  Besides, the $60 was a guess and a pretty accurate one if I say so myself.  This was, after all, our first shopping trip in a month’s worth of shopping.  I will let you know how well we did for July at our next “Budget Review Meeting” the first of August.

Budgeting is part of your planning.  If you want to grow your small business, then you need a goal which requires a plan to reach it.  Budgeting is your financial commitment to your plan.  so ask yourself where you want your small business to go and then plan how you are going to get there.

If you need help with budgeting and reviewing your past inflows and outflows, talk with your accounting professional and ask his help in understanding what is happening.  If you do not have an accounting professional or are looking for a new alternative, feel free to contact me to set up a free no obligation consultation.  I am here to help your small business meet your goals and dreams.

Have a great Thursday.

 

Location Location Location

~ C.O.R.E. Beliefs ~ 1 Comment

Good morning and happy Wednesday.  Even though it is a little cloudy, I am certain that it is going to be a great day.  I also updated yesterday’s blog to include a picture of Brendan at his award ceremony.  I am a very lucky dad.

Last weekend while we wandered downtown Portland, Kubae and I got to talking about business locations.  We would see a thriving business on one corner and another that appeared on life support a few blocks away.  We saw businesses that seemed out of place in relationship to the other businesses nearby.  It made us think about the old saying, “A great business in a poor location will fail.  A poor business in a great location will thrive.”  Or, “Location, Location, Location”.

Where you locate your business is a critical element of your strategy. This goes from what part of the country you locate to which part of a neighborhood you occupy.  I have often seen small businesses in challenging locations and when I discuss it with the owner, the answer has been typically, “It is what I could afford.”

I can appreciate the response but I think you owe it to your customers to really give this thought.  For instance, imagine you own a specialty home goods store.  You buy handmade decorative items from artisans in your area.  So far so good.  Now, who is your target customer?

Lets say your target customer happens to be a working couple who have limited time to shop but have lots of discretionary income.  They like shopping at other specialty stores and currently prefer to “touch-and-feel” their way through a shopping experience.  They eat out two or three times a week and prefer nice restaurants over fast food.

Knowing these basics, where are some locations and why might you choose one over the other?

  • A strip mall near a busy intersection with good traffic flow.  The strip mall has a hair stylist, a convenience store and 3 other vacant spaces.  Rent is reasonable.
  • An industrial type warehouse with some manufacturers and truck storage.  It is a little out of the way but the rent is very reasonable.
  • A strip mall located across the street from a major regional shopping mall.  There are other specialty shops such as a children’s boutique, a spa and nail salon, a highly rated restaurant.  Rent is on the high side.

I have given just 3 examples but you get the point.  The right location can help your small business get additional exposure.  It may cost more but the potential for new business may be worth the additional cost.  Think about this in relationship to the spaces above, your business and your target customer.

Chances are, your prospective customer is not going to search for you on the internet; at least not initially.  This business described above is solving a problem that the prospect doesn’t know he has.  By locating in the first strip mall, you might save money but probably will not get the right traffic flow.  The same goes for locating in a warehouse away from every day traffic.  Definitely a potential money-saving move but may not help you generate additional traffic.

If you are certain of your target customer, you might evaluate that being near a highly rated restaurant and other specialty – but not directly competing – businesses might be the right opportunity.  You could get walk-in traffic from before and after dinner or those who were shopping at other specialty stores very close by.  You will definitely pay more but your odds of attracting the right customer, your target customer, will greatly improve.  And getting your target customer in your location is absolutely critical.

So as you plan and budget for your business, think about location and the opportunity for increased sales, not just the cost of the space.  As you are planning, consider bringing in your accounting professional to discuss your budget, your plan and even your target customer.  Your accounting professional has a wealth of contacts and information that can be of huge benefit to you in the planning phase.  If you do not have an accountant or are interested in a second opinion, feel free to reach out to us at Currie & McLain.  We are happy to offer a free no obligation consultation to help you determine if we are a good fit for you and your small business.

Have a great day.