Ready, Set, your Budget: Maximizing Speed

Alright, it’s time for the fourth phase of your budget! In a sprint, this phase is maximizing speed. For your budget, it’s maximizing performance! By this point, you should have a budget set for 2015. You’ve budgeted your revenue, your cost of goods sold, and your expenses. You’ve reviewed for cuts, pricing updates, and strategy changes that will affect your budget. At this time, you should do a final review of your monthly budget for 2015. Is it realistic? Do you actually “see” yourself hitting those goals? If you’ve been generating a net income of $10,000 per year for the last three years, and next year’s budget has you at $100,000, you’d better be making some significant changes to your operations, or take another look at your budget and make adjustments. Make sure your budget is a true reflection of how you see the next year playing out.

Now, it’s time to maximize your performance!! So, let’s take a look at your current budget (the realistic one) and then think about setting some stretch goals. If you’ve considered adding a new product line or you’re implementing a new marketing program, think about what would be an amazing result! You may assume you’re going to see an additional growth of 2 clients per month due to a new program (which is what is reflected in your budget), but what if you saw 4 new clients per month? What would that do to your results? Maybe you’re streamlining your operations and hoping that the changes will eliminate some costs (but you aren’t confident enough in the figures to include in your original budget), adjust your budget to include the reduction in costs.

As you think of the awesomeness (that’s a word, right?) you hope to achieve with your stretch goals, make sure you adjust other line items as well. For example, if you’re in a service business, and you’re going to see 4 new clients per month instead of 2, that will likely result in the need to hire additional staff at some point during the year. Or, if you are overhauling your costs and think you may cut your marketing budget, think about what that may do to sales. A $5,000 per month cut in marketing may only result in a $2,000 reduction in sales per month, so it would still get you results, but you have to take both to the bottom line. Don’t get blinded by the fat bottom line and forget about how your actions impact other areas of your business. Once you have reviewed all areas of your performance, create a duplicate copy of your budget, and then make your adjustments to the monthly figures based on your stretch goals.

Your original budget should be realistic and achievable. You should manage to the budget each month and evaluate your performance based on it. However, your stretch budget is important, too! Think about where your business could be next year and then get about the business of getting there!