Not only is budgeting an honest look at what you can or cannot afford in your business, it is also the only way to guarantee your business makes a profit. And if you needed another reason, budgeting allows you to explore your business's potential e.g. IF you attracted more clients, IF you brought in an additional product range, IF you recruited another staff member....
This is called 'IMAGINEERING' - Building your business via your experience and imagination.
Step 1: Creating a set of budgets
Calculate how much it costs you to run your business each month. Fixed costs such as rent, insurance, management fees will be easier to calculate and variable costs, such as salaries and stock etc should be estimated and linked to your turnover projections. Add another 5% for repairs and maintenance and that will give you a pretty good idea where your break-even-point is. The moment your turnover equals your overheads, technically, you enter into the area of potential profit.
Step 2: Staff and sales plan.
If you are just starting your business you should be guided by your break-even-point in terms of estimated how you are going to achieve your turnover goals. It is not unusual to take anything between 3 and 12 months to achieve break-even-point therefore it is crucially important to stick to the budgeted expenses to avoid unnecessarily throwing money at your business.
If you have been in business for a few years it is easier to plan to grow your turnover bearing in mind that each year, your costs increase therefore your prices need to increase. This is more of a challenge if less that 80% of our your clients are not regular, money-in-the-bank clients. You might want to read our 'Loyalty Programme' blog (www.mysalonsoftwareint.co.za).
Step 3: Variation from Budget
Budgets are meant to be flexible. If circumstances change in your business e.g. You acquire a new staff member or somebody leaves, or you introduce a new service or retail products, check carefully if and how this is going to impact your budget (cost - return - analysis). Maybe you need to increase your advertising and marketing spend, or, if business is quieter than you would like you might have to do conduct short-term promotions or increase your social media activity.
Be very aware if and how much these activities affect you turnover, after all, the reason for budgeting is to protect the profit line and not to just throw more money at your business.
Enquiries - info@mysalonsoftware.co.za
Email: terry@mysalonsoftware.co.za | Tel: 083 650 0952
Email: sune@mysalonsoftware.co.za | Tel: 083 484 2960
Visit us on: www.mysalonsoftwareint.co.za
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