Reading Time: 7 minutes

Apple Podcasts

Spotify

Google Podcasts

Stitcher

About This Episode

As you and your organization navigate or enter the season of annual business planning, we want to help you turn meaningful commitments into measurable financial outcomes shared with leaders and team members in the form of next year’s goals. An essential part of this process is budgeting. Budgets make initiatives real as you outline how these decisions should impact your revenue, expenses, and profit. 

 

In this episode, we’re going to help you build a plan for your company’s money by teaching you how to create an annual budget for your business. While this may not be the sexiest topic, it is the difference between break-even, a black hole, or a growing bottom line. To help you build or refresh your budget BELAY’s COO and former CFO, Lisa Zeeveld, is going to break down the essentials of a business budget and walk us through the budgeting process she’s perfected over the years.

 

Your One Next Step

In each episode, we highlight one next step for you and provide an activation or delegation guide to help you immediately take action, start applying what you learn, and get your team to help you.

Your Next Step: Create a rough draft of your annual budget using our Bulletproof Annual Budget Template. It’s the exact template BELAY used as we grew the business over several years. This budget template will help you clarify your plan for revenue and expenses so you’ll have an understanding of what must come in, what must go out, and how much should be left over for your bottom line.

DOWNLOAD NOW

1. Forecast your annual revenue by month.

You’ll never know what you can afford if you don’t know how much money you’ll have. As you forecast revenue, consider your business’s seasonality, how many leads are in your pipeline, how long it takes you to close these leads, and when money will arrive in your account based on your business model. Reference industry experts and benchmarks for your initial forecasts as you get started if your company doesn’t yet have historical data.

2. Determine your margins in advance.

With your revenue projected for the next 12 months, decide what percentage of what you earn will pay for the product or service to be produced (cost of goods sold) and what rate you want to keep for profit. Allocate the remaining percentage to operating expenses such as marketing, IT, and employee burden costs like salaries, benefits, taxes, etc. The projected revenue and the fixed percentages will give you and your team an actual dollar amount to plan around.

3. Only pay for what your team needs to achieve the organization’s goals.

Implement a zero-based budgeting process, which Investopedia.com simply describes as a method of budgeting where “budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one.” Instead of merely giving your leaders and team members a sum of money to use the entire year, ask your team to create a budget and request funds based on what they need to achieve their objectives. Most organizations have leaders develop budgets based on what it’s allocated for their area. Modern business culture often perpetuates the myth that leaders must spend what’s in their budget so their department doesn’t lose it or so they can justify getting more the next fiscal year. Don’t let this type of behavior take root in your organization

What do you believe would be possible if you had a clear plan for your organization’s funds?
Based on what you learned in the episode, what do you need as a business owner or leader to personally need to budget for the business (i.e., time, information, expertise, etc.), and what can you do to get what you need?
What’s something you’d like to budget for in the next fiscal year?

Money is emotional, so build a team that can give it to you like it is.

Lisa Zeeveld

It’s very hard to cast vision for your organization if you don’t have clarity about where you’re headed.

Tricia Sciortino

You have to inspect what you expect to successfully reach your goals.

Lisa Zeeveld

Don’t let your metrics only tell you the story you want to hear.

Lisa Zeeveld

BELAY’s Virtual Bookkeeping Services

 

In this episode, we also threw out a few terms, many of which you’ll be familiar with, but we wanted to link to definitions in the show notes if you want to refresh your memory on terminology.

 

Revenue

Cost of Goods Sold

Gross Profit Margin

Operating Costs

Employee Burden Costs

Net Profit Margin

Zero-Based Budgeting

(04:39) Today’s listener question: “How do I create an effective budget for my business?”

(06:10) The first step in the budgeting process — forecasting your annual revenue, including how you can do it and what you should consider

(11:12) The second step in the budgeting process — setting your margins for the cost of goods (or services) sold, net profit, and various operating costs such as marketing, information technology, and employee burden costs

(16:38) The third step in the budgeting process — allocating expenses using a zero-based budgeting process

(19:28) The fourth step in the budgeting process — reviewing and updating your budget on a regular basis, ideally monthly

(24:49) Tricia’s advice and tips on budgeting for CEOs and business owners 

(26:15) Today’s One Next Step: Download our Bulletproof Annual Budget Template — a fill-in-the-blank template that will help you clarify your plan for revenue and expenses.

(32:31) Today’s One Next Step: Download our self-assessment tool, Pivot, Pass, Pause or Persevere, to help you access direction and momentum in areas of your business.

Your One Next Step

In each episode, we highlight one next step for you and provide an activation or delegation guide to help you immediately take action, start applying what you learn, and get your team to help you.

Your Next Step: Create a rough draft of your annual budget using our Bulletproof Annual Budget Template. It’s the exact template BELAY used as we grew the business over several years. This budget template will help you clarify your plan for revenue and expenses so you’ll have an understanding of what must come in, what must go out, and how much should be left over for your bottom line.

 

Download

Subscribe Today!

To get practical business tips and tools delivered to you each week, subscribe to the podcast via email here or on your favorite podcast platform (which we’ve listed below).  It’s like DVR for podcasts.

 

Subscribe using your favorite podcast app via

Join Us Next Week

Thank you for listening to One Next Step.

We hope you’ll join us for next week’s episode when our guest will be COO of Michael Hyatt & Company and co-host of the Lead to Win podcast, Megan Hyatt Miller. As a leader of an eight-figure business with 40 team members, wife, and mother of five, Megan knows the reality of navigating work and home. Now, she does it so well that she’s writing a book about what she calls The Double Win so you can win at work and succeed at life. Join us for next week’s episode, when Megan will help us answer the question, “How do I balance work and family life?”