How a Budget Can Grow Your Business

If you think a budget is a waste of time, you might want to think again. According to a QuickBooks survey, 61% of small businesses that created an official budget said their revenue increased year over year, compared to only 43% of those without a budget. While you can operate a small business without a budget, the odds of you improving your business go up significantly if you have one.

By operating your business with a budget, you have a roadmap for where you want to go. When you get off track, you have a guide to help you get back on.

As you near the end of the year, start your plan for the next year. Create your budget by month based on the growth you expect, investments you’ll make in that growth, new team members you’ll be adding, and your overall goals. Finalize your budget and set your plan for the year.

Every month, compare your results to your budget and get to work.

Revenue
If your revenue is off, consider the factors that contributed to the shortfall. Were you closed a couple of days due to weather? Were some of your providers or revenue-producers on vacation during that month? Did you lose a client unexpectedly? Did a project take you longer than you had anticipated?

Reviewing why you missed revenue will help you determine what you need to do the next month to get back on track.

Cost of Sales
If your cost of sales is off, it’s critical that you fix it quickly. If the price of materials is increasing or your labor costs have been trending higher, you need to address your pricing before you let it go on for too long.

Unless you have a lot of fixed costs in your cost of sales, when revenue is under budget, cost of sales should be, too. If revenue is over budget, cost of sales will be as well. Make sure you understand the correlation as you’re reviewing your budget vs. actual results.

Expenses
Reviewing expenses to budget will be critical to making sure your business stays on track. If you budgeted an increase to your expenses to support your growth, but you’re not seeing the growth you had anticipated, you need to make sure you’re slowing down on those increases.

Growth does require investment, but you need to keep an eye on how your expenses are tracking to your budget to keep your expenses in check.

Budgeting isn’t just about spreadsheets — it’s about clarity and control. Having a budget in your business will give you the roadmap for growth. Just remember, a budget only works if you actually use it. Monitor your progress each month and evaluate where you stand compared to your plan. If you’re off, determine what you need to do to get back on track.

If you use your budget to help you manage your business, your budget will help you drive your growth.

If you’d like support in building your budget, check out our Budget Builder Week.