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Small Business – Building Your 2008 Budget

Posted on November 29, 2019 in Uncategorized

It’s the beginning of the year, so what should you be thinking about? No, not the New Year’s Party… your 2008 budget. Actually, you should have already thought of it, completed it, and shared it with your managers, but since there are many procrastinators in the world (including yours truly), there are many budgets yet left undone.

A budget is more than an exercise in futility if you do it well. It allows you to be aware of hidden or unexpected costs, it gives you a benchmark to reach, and most importantly, it shows the world (lenders, venture capitalists, analysts) that you have a good idea of how your business operates and what the costs are to run it.

Business Development

Start with your business development group – they need to provide you with the expected revenues and costs of gaining those revenues. The revenues will provide you a benchmark against which you will judge your business development group. Often they will fight giving you particularly aggressive numbers. After all, who wants to be held to a high standard. Push back, ask them what they will need to attain higher numbers. Often it will be another employee or a more extensive marketing budget.

  • Employees – salespeople, business development people, customer support
  • Travel – often a big component of the business development budget and often under-estimated (includes meals and hotels)
  • Entertainment – any entertainment needs for clients (usually meals)
  • Advertising – any media should be included in this.
  • Press Relations – press can often be the best way to get your message out. Make sure you have a good PR strategy.
  • Marketing – branding, marketing materials, mailings, collateral (brochures, etc.)
  • Conferences and Trade Shows – this should also include any time from non-business development people
  • Other – any other costs that may be specific to your products or industry

Production

In terms of the budget, I am considering production to be the people who do the work. If you own an accounting firm, these are your accountants. This budget should be based of the revenue forecast. Your production team needs to give you a budget for what they will need to meet the revenues forecast

  • Employees – this may be both people completing the work and their support (such as quality assurance, although in a large enough company, QA may have its own budget).
  • Materials and Supplies – what are the inputs needed to product your products. Even accountants need paper.
  • Equipment – any new equipment that is expected to be purchased throughout the year to accommodate the group.
  • Travel – if your business requires production employees to travel to meet with customers, a travel budget should be included.
  • Other – any other costs that may be specific to your products or industry

Information Technology

The IT group will be supporting the rest of the staff. They should have a good handle on any equipment that needs replacing. They should also get a list of computer and/or telephone equipment requested by production so that they will be prepared for installation.

  • Employees
  • Materials and Supplies
  • Equipment/software
  • Other

Human Resources

If you have over 15 people and are still growing, you should probably have at least one HR person, if even on a part-time basis. Regardless of whether you have a specific HR person or it is part of another’s duties, you need to have a budget.

  • Employees – either the cost of your HR person or a consultant if you are outsourcing
  • Travel – any travel to conferences or recruiting trips
  • Recruiting -advertising, recruiting firms, flying in potential employees, moving expenses, signing bonuses
  • Benefits – cost of providing benefits, such as a 401K program, healthcare, etc.
  • Employee Relations – holiday parties, gifts, company sports teams support
  • Other

Management and Overhead

Your management and overhead are the costs that are shared resources for all groups in the company. This is purely an expense and should be kept to a minimum if possible.

  • Employees – any employee who is a shared resource among all groups, president, finance person, etc.
  • Travel – management usually has some travel needs
  • Rent and Utilities – some utility costs are variable, cell phone costs for instance may be driven by number of salespeople. Heat, A/C, and power tend to flutuate more with the weather than the number of employees.
  • Office Cleaning and Maintenance
  • Taxes, Licenses, and Permits
  • General Office Supplies
  • Legal and Accounting Costs
  • Other
  • If you are able to build a good budget and meet it, it shows that you are knowledgeable about your business and understand the costs and drivers. If you are unable to build a budget that has any meaning, it indicates a business out of control. For both your benefit and that of any investors, it is best to spend some time working on the budget and the rest of the year meeting it.