Budget in growth for 2021
Hey, I’m Michael Eckstein 👋, and this is ‘Ordinary & Necessary’, a weekly newsletter about the boring business topics that don’t get enough traction on the web, but will help you manage and grow your business. You signed up on my website. If you’d like to unsubscribe, just click the link at the bottom of this email. No harm, no foul, I’d love to have you back sometime.
It’s annual budget season! Annual budgets are a great tool to understand your business and plan your upcoming financial year. A good annual budget can help you forecast revenue, allocate funds for expenses, then give you benchmarks to look back on at the end of next year. (Also, “sorry, I’ve already allocated my budget,” is a great excuse to give persistent salespeople 😉)
But, many annual budgets (and blogs about them) fall short when estimating new, increased expenses. They assume your business will grow without any new expenses to drive that growth. But, as your revenue increases, so will your fulfillment costs. Your payroll, supplies, software, and cost of goods sold will all increase to meet the new demand. Sometimes, that increase will be proportional (eg, cost of goods sold, supplies) and other times, it’ll jump all at once (eg hiring a new employee).
On top of that, annual budgets rarely include the expense of getting to that new revenue goal. As the saying goes, you need to spend money to make money. You need to budget in growth.
Budget for:
Marketing: Unless you have a strong referral base, you’ll probably need to invest some amount of money into marketing. It doesn’t have to be a new website or increased ad spend. But, it should be something that helps get the word out. For example, if you’re a great networker, it could be budgeting in $150/mo for weekly lunches with colleagues.
Education: Education isn’t just another degree or professional continuing education. It can be online courses, paid Patreon/Facebook groups, books, or even a business advisor/coach. Good education will save you time and money. Instead of learning from your mistakes, you’ll learn from someone else that’s been there before.
Retirement: I know, it’s boring (and not exactly budgeting for growth). But, if you don’t budget in saving and set the money aside, no one else will. Put retirement savings in your annual budget and actively contribute it to a retirement account.
Action item: Set an ‘invest in my business’ budget. It can be $50/mo or $1,000/mo. Whatever makes sense.
Have a great weekend, stay safe, and merry Christmas! 🎅
Michael Eckstein
P.S. If you’re into electronic music, every major DJ has streamed sets during quarantine. I’ve had this set by Purple Disco Machine on repeat: Live from Dresden