Business Planning: How Many By When
Hi Readers, this is Part 4 in the Business Planning Blog Series. The next step for business planning is how many by when (budget).
For some people the numbers part of the business plan can be boring. I love this part of the planning process. There are several ways you can work out your numbers. You can base your budget off of last year’s performance. You can create your budget from your forecast. You can determine a set percentage of increase you will target and create your numbers from there. Any professional accounting program can generate a budget for you based upon these approaches (provided that you keep accurate records).
Here is what I recommend. Start with identifying how much profit you want to make. You will need to know the following information: fixed costs, variable costs and contribution margin (see our article on Break- Even Analysis for more info). Next add your fixed cost to how much profit you want to make divided by your contribution margin (FC + P/CM). Calculating these numbers will give you the total sales needed to cover your costs and generate the profit you want. Now it is a matter of allocating your sales and costs in your actual budget.
This may sound very complex, but with practice it is very easy. If you have a team of people on your management, it would be great for all of them to have a part in this process. If you expect to hold people accountable to a budget, including them in the process will encourage ownership of the budget. The by-when is the timeline for your budget.
If you want to dialogue about this step in the business planning process provide a comment to this blog and I will respond or simply email me directly at chari@businesscoach.com. I also encourage you to submit a question to one of our experts on this topic.
Have a great week, Chari Darneal
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