Whether it is for your personal finances or for your business, I am sure you have been slammed over the head with “the hammer” many times.
You need to have a budget.
Above all else. Before you even lift a finger. Have your budget. Live and die by it.
Now, I am the accountant who likes to think of things a little bit differently. But, I am going to tell you the same thing. Kind of. You need a budget. But, not for the reasons you might think.
Personal finance gurus will tell you that you need a budget for your fledgling business because of one thing.
I’m here to tell you that is definitely NOT why you want a budget for your business.
I’ll tell you that for the same reasons it usually backfires for personal finances as well. That reason? Well, we all hate discipline. We don’t like being told what to do. That certainly goes for a group of people like solopreneurs who definitely do not want to be told what to do and when to do it. Because if you did, you’d be parked in front of the TV watching reality TV waiting for the next morning to come, right?
The last thing you need as you build up your dream into the form of a business is to constantly feel guilt about the choices you make.
So, if not for having it to punish you mercilessly when you misstep, why do you need a budget?
Because it helps you understand your business better.
I even hate calling it a budget because of all the negative connotations that come from it. I prefer calling it a “plan” or a “forecast”. Whatever you want to call it, just know that it can be the backbone of your business if used correctly.
Here’s some ways to get the most out of your budget.
~Be honest: There’s no use taking the time to put a plan together if you are not going to be honest about it. You’re just wasting your time. Be true to yourself and honor the process. Be real with yourself and take a hard look at what sort of revenue you expect to come into your business from your customers. Be honest about your expense.
~Do NOT let it be the first tool you use in making a decision: If you are making a big or even moderately sized decision for you business, there’s questions to ask before you even open up that spreadsheet. Is the decision in alignment with your core values? Is it something you have time for? How will this investment improve your lifestyle or your business? Once you have solid answers to those questions, THEN you pull out that spreadsheet and see if the pieces fit together.
~Don’t take it personal: Your budget is nothing more than a tool in your solopreneur toolbox. It’s not a judge of your character or your abilities. The worst part of taking your budget personal is that you are then more likely to abandon it because it brings to you towards ill feelings when you think about it. That’s definitely not what you want. You need to take emotions out of it and look at it.
~Learn from it: More important than blindly following your budget is to accept you won’t follow it 100%. It’s the time you spend figuring out after the fact why you didn’t is where you gain all kinds of insight about your business (and yourself).
I can’t stress this enough. If you put $10,000 in sales in your plan and it only made $5,000, it’s not an opportunity to beat yourself up or feel bad about your performance or abilities. What it is, instead, is a blaring signal from your plan telling you this is a place that requires your attention. WHY didn’t that product make what you thought it would? Should you have invested more time or money in it? Where should you have invested it in ?
So, don’t live and die by the structure of your budget. Instead, squeeze precious knowledge about your business and the decisions you make from it. Take the time to learn why things didn’t go the way that you thought they would, for better or for worse.
You’ll be a better solopreneur for it.
Have a passion for your business, but don’t know where to begin with your accounting? This can help.