The Point of Budgeting In Small Business

Too many small businesses operate without budgets. And many small businesses that do have budgets aren’t getting as much out of them as they could. We’ve seen it time and again.It isn’t because the mechanics are difficult to manage. Everyone knows the basics of how budgets work: you track money coming in, you track money going out, and you do your best to plan for the future. In fact, the very simplicity of that formula is what leads some small-business owners to consider budgets not worth the trouble.Therefore, what we’ll discuss here isn’t what budgeting entails, because if you don’t already know that, you can find it out with ease. We’re more interested in why you should budget in the first place. Our suggestion, to put it plainly, is that budgeting is a way to amplify the very creativity and adaptability that allow small businesses to thrive.Budgets’ ReputationYou don’t become an entrepreneur because you have a burning love of spreadsheets. At least, not usually. Being an entrepreneur isn’t supposed to be about budgeting. It isn’t supposed to be about paging through endless columns of variable costs or putting caps on spending. It’s supposed to be about having the freedom to blend innovation and risk-taking with passion and expertise. It’s supposed to be about removing barriers, not building them.That being the case, small-business owners often see budgets as antithetical to the very spirit of entrepreneurship. According to this perspective, budgets impose stifling limitations. They’re artifacts of mega-corporate culture devised by clammy-handed people in windowless rooms with poor lighting. They may be necessary evils for sprawling, inhuman conglomerates, but when it comes to organizations that rely on individual personalities and individual decision-making, budgets are more burdensome than helpful.You might say the constraints imposed by budgeting make small businesses less nimble. Since nimbleness is one of their main advantages over larger rivals, budgets actually decrease small businesses’ ability to compete.Or so the story goes.Some of it is accurate. For instance, it’s true that passion and innovation go hand in hand with entrepreneurship. It’s true that small businesses should strive to leverage their size into a competitive advantage. And it’s true that budgeting for small businesses is much different from budgeting for colossal corporations.What’s not true is that budgets impose constraints. Budgets don’t actually impose anything. They merely describe constraints that are already present. Perhaps more importantly, they describe a business’s ability to cope with and even manipulate constraints placed on it by forces internal and external.Constraints and Entrepreneurial CreativityIf you’re an entrepreneur, you’re aware that your business doesn’t operate in a vacuum. It’s part of a staggeringly complex system. For instance, you have your relatively immediate concerns, such as your employees and your local government. You also have your relatively big-picture concerns, such as national debt and foreign trade policy. No matter what, when you start a small business you’re going to be hemmed in by laws, regulations, and unavoidable economic realities, all of which will have a major impact on how you operate.In other words, no small business starts out in a position of unfettered freedom. The very conditions that allow small businesses to exist also impose a variety of constraints. Working capital, interest rates, the minimum wage, the minimum competitive salary for professional employees-there are countless factors that limit what you can do and how much money it takes to do it.You can acknowledge the reality of these factors, but if you don’t have a budget, then you might not know the exact ways they’re affecting you. What particular constraints does a business in your industry have to deal with? Are there some that have a disproportionate impact on you because of the way your business functions? Can you make changes to reduce their impact? Are there constraints that you handle in an especially productive way? Can you turn this productivity into an advantage over your competitors? Do you approach some constraints the way everyone else does, even though you could be doing a better job with them?These are the sort of questions a budget helps you answer. It doesn’t create limitations that weren’t there before. Rather, it gives you a way to assess the pre-existing limitations that every small business in your industry has to deal with. The more thorough your assessment of those limitations, the greater your ability to work within them, work around them, or in some cases, make them work for you.Making limitations work for you is where entrepreneurial creativity comes into play. If you have enough details on your business’s limitations, then you’ll be better able to turn those limitations into innovations. A budget will help you marshal your creative energies and find the opportunities for profit embedded in the market’s constraints. It tells you exactly what assets you have to work with, and helps you map out how those assets can be put to the most productive use given the rules of the industry.After all, most of the market-based constraints you experience will be shared by your competitors, who also have limited amounts of money and freedom. Which of you comes out on top won’t be determined by who has the fewest constraints, but by who does the best job of manipulating common constraints to find the possibilities they hide.Speed, Spontaneity, and ProfitSmall businesses, precisely because they’re small, tend to be better than their larger competitors at taking quick, decisive action. It’s one of their vital advantages. By the same token, it’s one of the challenges that all entrepreneurs are bound to face. You’ll be forced to react on a moment’s notice to emerging opportunities or perils in the market-that’s a given.What’s less certain is the profitability of your reactions. Obviously, acting or adapting fast doesn’t do much good if it yields a loss.So what information will you use to make your quick decisions? Do you have a detailed, practical breakdown of your business’s strengths and weaknesses? Do you know exactly how many resources you can afford to redeploy at a moment’s notice? Do you know how efficiently different aspects of your business tend to use the resources you devote to them? Are certain aspects of your business already strained? Are certain aspects flush with the potential for expansion?A budget gives you a diagnostic readout of your organization. It tells you how much stress the business can handle and which areas can handle it. Hence, it helps you decide whether acting conservatively or aggressively in the short term will enhance your performance over the long term. Without a budget, you’ll be relying too much on guesswork, and many of your quick decisions may be needlessly risky.Supply-chain RelationshipsA budget not only helps you assess yourself, but also helps you assess your relationships with other entities, like vendors and subcontractors. This will be especially important when the market is in flux.As you know, successful entrepreneurship entails evaluating the vast array of forces that constitutes the market and determining where-for someone in your industry, someone with your passion and expertise-the opportunities and roadblocks lie. But no one can predict with any certainty how the market will behave tomorrow. There will be surprises. Sudden chances and sudden setbacks.We’ve already noted that the way you respond to these inevitable surprises will play a critical role in the profitability-or survival-of your business, and that your ability to make the right call at the right time will be drastically greater if you have a budget in place. This is not only because a budget tells you about your own resources, but also because a budget helps you deal with other organizations that affect you.Let’s say you experience a sharp increase in demand for your product. It’s good news, but it brings up questions: Do you have enough working capital to provide your product to a large number of new customers/clients? What are the current resources of each division of your business? How many more resources does each division need if it’s going to ramp up its activities? How efficiently does each division tend to use its resources?These are all internal questions that may well lead to others, such as: What do your vendor accounts look like? How much new inventory can you afford to purchase? What type of sales will you need if you’re going to pay off the new purchases on time? Can you afford to hire subcontractors to help with the push?And, of equal or greater importance: What’s your plan for a downturn in demand? Will you find yourself in a precarious position with your vendors? Will you be able to keep promises to new customers? Will you be able to pay your subcontractors for the hours they’ve put in?Indeed, budgeting can provide invaluable support for all your relationships. As noted on, “your suppliers are in all likelihood mapping out their expectations for the year and you can help them do so by providing your outlook. As a best practice, you should share your budget and the variety of scenarios you might face to see whether they can handle each level of demand” (Field 2010).Since your business is one element in a network of other businesses, it’s important for you to be able to communicate both your capacities and your expectations to the people you rely on. A budget serves as a tool for facilitating such communication. It gives you a concrete way of describing not only where you stand, but also where you will stand in a given scenario. Thus, it helps foster strong partnerships and avoid uncomfortable conversations.This doesn’t mean sharing every detail of your budget, nor does it mean sharing some details with everyone. It simply means that guarding your budget like a state secret takes away some of its efficacy. You can use select portions of your budget to assist you in negotiating with critical partners-i.e., you can be prudent about the information you divulge without being obscure. How much do your current business partners know about your budget? Is it enough for them to understand your capacities and your needs?The BankSpeaking of business relationships: you don’t want to mess around with the bank. Plain and simple. This is a relationship that should be as friendly and open as possible. And what do bankers like? Budgets. As the American Bankers Association (ABA) says, “You are flying in the dark financially if you don’t have a budget for all income and expenses.”Come to them without a budget, and bankers are going to feel like you’re wasting their time. They’re certainly not going to be interested in loaning you money (or more money). “Prepare for your financial review with your banker,” says ABA. “Have current inventories, cash flows and balance sheets ready.”When your banker asks you how your debt is structured, and whether you have an imbalance between long- and short-term debt, what are you going answer? Trust us: if you show up to that meeting with a budget, you’ll be glad you did.FlexibilityJust as the market’s unpredictability makes budgets useful, it also makes them fallible. A budget is like any plan: it will contain inaccurate predictions and require ongoing revision. That’s simply a condition of commerce; some academic models are predicated on entrepreneurs having perfect foresight, but we all know that’s not the case. Businesspeople, even the world’s most celebrated financial prognosticators, get it wrong sometimes.That doesn’t render planning completely useless. Even if your plans don’t entirely match the way reality unfolds, they serve as benchmarks against which you can assess your progress. They record where you wanted to go, where you actually went, and why the two didn’t coincide. In that way, they indicate which areas of your business are performing well, and which need to be modified in order to meet next quarter’s goals.When it comes to small-business planning, certainty is off the table. Nothing is guaranteed, including budgets. But setting expectations and monitoring progress remain indispensable to long-term survival. They help small-business owners analyze why they’re drifting off course, and also help them formulate corrective measures.How do you see a budget? As a static report that turns old news into flimsy predictions? Or as a series of living documents that records how you adapt to change?PersonnelThorough budgeting calls for a great deal of effort, and many small-business owners can’t spare the necessary time or energy. Frankly, while the minutiae of budgeting are of interest to the entrepreneur, they are not the entrepreneur’s main job. If they were, then a good head for numbers and a background in financial analysis would be prerequisites for entrepreneurship. Yet plenty of small-business owners have succeeded without an affinity for mathematics or statistics. Entrepreneurs don’t all begin as certified public accountants.That being the case, most small-business owners hire a bookkeeper. A bookkeeper collects and organizes your financial information, which, again, is time-consuming and requires close attention to detail. Too much time and too much attention for small-business owners to sacrifice. But even if you’re not involved with gathering and sorting your financial information, you needn’t remain aloof from it. To get the most benefit from budgeting, you’ll want to be accustomed to reading your financial statements and locating important data in your financial system. When you meet with your bookkeeper, are you talking about his or her methods? Is he or she showing you how your financial information is organized? Are you able to navigate your bookkeeping software on your own, so as to pull up specific pieces of data without your bookkeeper’s assistance?Proper bookkeeping is important, but it rarely goes far enough in the analysis department. You’ll notice that the bulk of our discussion has revolved around using budgets to orient yourself in the market-i.e., using them to take advantage of opportunities and to minimize risks. That requires more than tabulating numbers; it requires interpreting them. It requires fitting your numbers into a larger picture.Is there anyone in your organization besides you who (1) monitors your finances on the close-in, detailed level, and (2) relates the details of your finances to your big-picture performance? If not, chances are you’d benefit from a dedicated financial person. Someone whose duties involve painting a comprehensive picture of your financial universe-more comprehensive, that is, than the picture you’re able to paint on your own, simply because you have other things to do.As with most aspects of running a small business, getting the most out of budgeting requires skillful delegation. If a budget is going to inform your decisions at major turning points, then it’s a good idea to have someone to consult with, someone who’s been looking at the same numbers as you while also looking at the same problems.TakeawayThe value of a budget doesn’t rest on the accuracy of its predictions or the stringency of its cost-cutting. Instead, the value of a budget rests on how well it articulates your business’s financial strengths and weaknesses. A budget exists to help you balance risk against opportunity, to help you determine whether aggressive or conservative action is the right thing for the moment. It also exists to help you communicate with your business partners-to, in other words, cultivate healthy, mutually beneficial relationships with the organizations you rely on.Above all, a budget exists to de-mystify, or express in concrete terms, the limitations imposed on your business by the market. Thorough budgeting, especially when undertaken with the right personnel, can enhance your creative initiatives and merge adaptability with profit. In short, budgeting is a way to sharpen, not blunt, a small business’s advantages.CitationsAmerican Bankers Association. Ten tips for small business owners during tough financial times., Anne. 2010. How to budget and manage inventory for 2011. Inc.

Starting A Business Without A Business Loan – 3 Ways

You don’t really need outside money – things like business loans or venture capital – to start and grow a business.In fact, there are over half a million (500,000) new businesses started each year in this country (each and every year) and I can guarantee you that very few of them get or qualify for a business loan or some other form of outside capital.Given the poor capital markets that small businesses face these days with banks not lending to small business let alone to startups, over 90% of all new businesses have to get their companies up and running without any type of outside financial help at all.So, how do they do it?They find a way. Which is the defining characteristic of an entrepreneur – to find a way to make it happen.All businesses are limited in the amount of resources they have to run and grow their companies. Thus, in order to survive and expand, they have to get the most out of the resources (cash, capital, equipment, property, labor, etc) they do have.Therefore, those businesses that do succeed in starting up their companies without business loans do so by finding a way to make what they need happen. For example, a business that has no money or staff (limited resources) to kick off a marketing campaign but is still able to drive customers to the business by using free resources like social media, word of mouth marketing and referral programs. Or, the new bakery business that can’t afford a kitchen or kitchen equipment but grew the business by using other restaurant’s stoves and ovens after hours and providing them a percentage of revenue earned in exchange.While getting a business loan or millions in venture capital will surely make your business life easier, having those resources is not a key element for success. What is is the ability to find a way – any way – to start and grow your business regardless of what you have on hand.3 Ways To Start Your Business Without A Business LoanThe first thing to understand is that all businesses are unique and thus all have to find their own unique ways to overcome their particular obstacles. To that point, we tried to generalize these 3 simply ways to startup a new business as a means of not providing a concert road map to your individual business success but as a means to demonstrate what can be done and then let you take the ball from there and apply it to your own situation.Lastly, while the following may be instinctive to some they may also seeming impossible to others, do know that businesses have been using these methods or some variation of them to start their companies since the beginning of time.1) Don’t Use Any Money.Most of the time, new business owners will use the capital (money) they have on hand to get tasks done – either by hiring labor to do it (be it employees or professional help) or purchasing a product or service that will complete the task for them. What this means is that their money is being spent to save the business owner some time and effort.However, if you don’t have any money – then you just have to do those things yourself. And, for those business tasks you are unsure about, you just have to take the time to learn.Here is a great example. When Bill Gates first started Microsoft, he too had limited resources and spent most of his money hiring geeks (software designers, software engineers, etc). But, that left no money for legal issues or accounting. Thus, when he hired someone, he would also tell them; “you now have to go learn the legal side and handle that for us” on top of all your other duties.Did it work? Look at the company now.Other example could be a retail business wanting to set up a brick and mortar store front but not having the money to do so. Thus, the owner takes the business online first and uses many of the free resources out there (like eBay, Amazon, WordPress and even Facebook.) to do it – followed by spending a lot of their own time making it all come together.Then, when the business gets to a certain point that it can afford rent or a lease and all the other expenses related to running a traditional retail business – it can then decide if that is the direction the business still wants to pursue.Other ways to get business task done without spending money (especially if you don’t have money) are:Note: These are just a few of the major expenses that small businesses have to face.For marketing: There are so many free ways to market a business in this day and age – all mostly related to social media. If your potential customers are out on these free social networking sites – then so should you be.For labor: Most new businesses don’t need full time labor as they just can’t keep people busy enough all the time. Thus, look for ways to hire interns, college students, or even people that will work for equity in the company. Thus, you can still get done the tasks your business needs without spending a dime.Or, hire local or national free lance individuals who can get those tasks done at a fraction of the cost of hiring a full-time or even part-time employee. Thus, their minimal cost is directly related to the revenue they help bring into the business.For operations/management: Accounting, inventory management and sales tend to require very sophisticated software programs to control and manage – or do they? There are many bare bones, open source software programs out there on the market that can handle nearly any management task in your business. And, they are all free. The one draw back is that they usually offer no live support but most have forums where you can get answers to all your questions – quickly and on your time. Thus, these free programs can easily become your front and back office without a single monetary expense to you.It just takes some time in finding these free programs and learning how to get the most out of them.2) Work On Your Business Part-Time.One of the hardest parts about starting a new business is also having to cover personal expenses during the startup phase.It is estimated that it takes a new business 12 to 18 months before it hits its breakeven point – meaning that it takes more then a year before the business is earning enough in revenue to cover just the business’s ongoing expenses – let alone having enough in profits to pay the business owner.And, if you can’t access an outside business loan, this also means that the business owner might have to go that 12 months plus without a paycheck.On top of that, throw in this poor economy and that 12 to 18 months could stretch out to 2 plus years before the business hits that all important breakeven or profitability point.To combat this, many new entrepreneurs keep their day jobs and work on their businesses part-time – at night and on weekends during this startup phase.This means that the business has to be started on a smaller scale and potentially limp along until the business is able to sustain itself.However, keep in mind that this is only temporary and that end goal is to eventually transition full-time into the business when it is feasible to do so.One example of this (and there are many) is the moving company PODS. The founder of PODS keep his day job and worked just a few hours each night on his business plan and business. He did this as he was not in a financial position to quit his job as well as his desire to spend some quality time with his young family while the business began its assent.However, with some personal income, this business owner was also able to:
Take a lot of the stress of a new business off his shoulders in regards to covering his personal expenses,
Provide some money to put into the business as needed, and
Most importantly, allowed the business to focus on a long-term growth strategy as opposed to a short-term, get revenue now strategy, that would have forced the owner to make bad overall business decisions.
Thus, by having a full-time or even a part-time job in conjunction with the business, will allow new entrepreneurs time and additional resources to research and develop their products and services, market the company and properly grow the business for the long-term (which is the end goal after all).3) Use Your Own Savings.Given the poor likelihood that most businesses will get or qualify for a business loan – even for a SBA guaranteed small business loan – means that many business owners have to rely on personal resources to fund their new companies.This can be good in several ways. First, the business owner already shows the discipline needed to make the right decisions to the benefit of the business as saving money takes a lot of discipline.Second, by already having the needed funds in place, the entrepreneur can more easily focus on starting and growing the business and not worry about debt payments or resistive loan covenants.And, lastly, starting a business is about securing the financial future of the business owner – almost the same reason that people save money. Thus, using personal resources is essentially just trading one method of financial security for another. As the business grows, it will be able to offer much more to the future wherewithal of the owner then their savings ever could.Types of personal resources that can be used include:-Personal savings accounts,-Selling off personal assets like stock and bonds or other personal property that has monetary value but no longer has personal or nostalgic value.-Or, taking retirement funds and investing them in the new business.Lastly, even if you don’t have savings or personal resources now, you can always continue to work at your present job or any job while you save those funds. Again, it is just temporary until you have the necessary assets on hand to start your business and realize your true dreams.ConclusionHaving a business loan or some form of outside capital might make it easier to run your new company in the beginning – until you have to pay those funds back – but having a business loan is not really necessary to start a new company or to succeed in business.There are many ways around having to seek a business loan – a few we outlined here.Just think about the hundreds of thousands of businesses that get started every year all over the world – since the beginning of time – and how they were able to find ways to get their companies up, running and on a solid path to success – all without business loans.If they can do it, so can you – you just have to be willing to try and find ways, your own unique ways, to make it all happen.

Pay-Per-Click – An Online Business Marketing Strategy

Harnessed Internet Technology has opened up more doors and avenues for the online business, than it has for any other segment of society and businesses. If you have an enterprising nature and are for some reason bound to a place, then the Pay-Per-Click online marketing campaign management is exclusively for you! An online business opportunity just got bolder and better with this highly innovative game-plan.1) So what exactly is Pay-Per-Click?Well, Pay-Per-Click is a popular advertising model. This exquisite technology driven management strategy is used by all the search engines. The extravaganza of the indulgence lies in the fact that the Pay-Per-Click online business marketing strategy requires you to make a payment every time someone, in some remote region of the world, clicks on your advertisement online!2) What is in it for you, if you have to pay?Pay-Per-Click online campaign management gives your online business opportunity to gain from the potential of other people around the world. This business marketing strategy is very effective and today ‘Paid Search’ is a thriving competitive arena. The marketplace for your goods and services now are not bound to geographical confines anymore! Statistics and recent research reveal that the Pay-Per-Click online marketing strategy is growing in popularity by the second.3) How do you become a part of the profitability?All that you need to do is invest in the ready-made teams of certified professionals. These skilled technicians make your profitability their business from the moment you sign on. They use the technology at hand to improve the positioning of your business in the global online market and tap on the potential of the online business opportunity to lower advertising costs.4) Where is the guarantee?Pat-Per-Click campaign management is a valuable business asset. You begin making a global presence the moment you pay for leveraging the experience of S.M.E or the Search Marketing Experts. This guarantees you more clicks and inquires about the business, and the added advantage of turning these queries into sales, thus generating profit for your Online Marketing.5) What is the cost factor involved?Pay-Per-Click campaign management assures you of effective advertising campaigns for the goods and products or services that you provide through the established business. The higher R.O.I (Return of Investment) earned helps the business performance to be boosted. Your online business benefits from the advanced technology, gained competitor insight and special activity analysis that is offered free of cost!6) How to Access Pay-Per-Click:You can access the best Pay-Per-Click campaign management strategy providers online as well as offline, 24×7, 365 days a year.All the in house professionals offer you the application from years of experience, carefully assimilated knowledge and certification to back the guarantee given. You get to bag the positive results from this highly innovative solution almost immediately. There are Pay-Per-Click campaign strategies for businesses in many industries. They are all headed by Internet Marketing experts.Pay-Per-Click campaign management helps you to not only target local customers, but also display your listings within the specified radius. The best part of this internet based advertising strategy is that you can keep on, consistently, refining the campaign in terms of lowered cost and improved performance. Success in this application is measured in terms of the best strategy and not the technology used. The in house experts help you to gain, by analyzing your ‘buying’ process and the words used by your clientele to ‘search’ for your services or products.Warmest Regards & Best WishesLEE PARRY
Online Coach, Mentor & Internet Marketer.http://www.UrNetBizSecret.comand