As a small business owner, we wear many hats. With those various tasks we are responsible for, we are bound to make some mistakes along the way. Big mistakes often equal expensive mistakes. A small business cannot afford to make expensive mistakes. Does any of this sound familiar?
Do you rely on your gut rather than the facts? If you want to avoid making the same mistakes, then stop relying solely on your gut to make decisions. Make decisions based upon facts, not your gut feelings.
Accurate recordkeeping will help a business owner know and understand the facts. This not only is important in making current day to day business decisions, but also is vital in making future marketing decisions.
Is your budget like your business plan? If it is created, do you look at it regularly? Each year, it is important to take the time to create an annual budget broken down by month. This allows you to make actual versus budget comparisons at the close of each month.
A good budget blends actual historical financial information with your educated guess about the future of your business.
It is important to keep your budget consistent throughout the year and compare your actual results to your budgeted hypothesis. Your budget doesn’t change.
There is difference between a budget and a forecast. A budget
is an educated guess about the future that remains the same. A forecast
is an educated guess about the future that is constantly changing. When reviewing the budget versus the actual performance, identify fluctuations and opportunities and use that information to forecast the next several months.
In your forecast, take into consideration major changes that you know are coming. If you are about to release a new product or service, then you know the anticipated sales and costs associated with that. Additionally, you know the seasonal swings (if any) associated with your business and what expenses you are likely to incur.
As a landscaper, it may be gearing up with seasonal help at the start of spring. A restaurant or retail store may see an increase in sales as the holidays approach that may affect inventory.
Business owners become obsessed with their past financial performance. However, they fail to look out into the future. Don’t worry so much about what happened in the past. What’s done is done. Take what happened and use it to forecast out into the future.
Don’t’ focus on past mistakes and become frozen in fear. Use past performance to make an educated financial forecast. Make critical business pivots to keep your business on the path to achieving your goals.
Smart business owners can take the good and bad aspects of their business decisions and predict what may happen while making strategic moves to ensure their business is a success.