Why
Budget?
Of the hundreds of
CEO’s I have coached over the years, we found that less than 3% of them made it
a discipline to do an annual budget. That Was The Good News. BUT after an Estrada Strategies coaching
session, we discovered their budget was not a true operational budget that
could provide each department manager with a set of clear financial goals.
SO….NOW WHAT?
First let me tell you that 100% of the fortune 1000
companies do annual budgets. A common
reason smaller business owners give for not doing a budget: “I don’t know how”. Sound familiar? Numerous business owners have no financial
background and cannot read their own Profit & Loss, Balance Sheet or Cash
Flow reports. A huge problem, because understanding and managing your finances
is critical to the short term and long term survival of the business. There is
hope and it lays within this simple statement, “Don’t do it alone”.
Another common response is: “I have never needed a
budget before.” OK….time
for a useful story – but don’t take as a sales pitch for Estrada Strategies. I
once had a client whose 150Million Dollar business had never, in 25 years,
produced a financial budget. The CEO was proud to tell us that he never looked
at his own financials. Weird? No. Typical? Yes. However, late in 2008 the CEO
sought help to set up a budget for the New Year. His company was very IT
dependent. The company needed new servers and computers, but were strapped for
cash. Estrada to the rescue! Even in the early stages of the budget process,
significant opportunities for overhead reduction were realized. Cell phones and
gas cards exceeded $20,000 per month. As we reviewed the historical financials,
line by line, and were able to reduce another $35,000 of monthly expenses that
could be cut with very little impact to operations or employee morale. As a
result, they had money for new computers, they built liquidity on the balance
sheet and managed 2009 with a much higher degree of certainty and confidence. A
fantasy story? Not-At-All.
So, what is the point of this article? Doing
an annual financial budget and managing from that budget is a critical
“Discipline” for every business, regardless of size. And if you are honest
enough to admit that you do not know how to create a budget and manage your
business with one, then you are on the road to removing the veil that’s been
keeping you from seeing the financial indicators that drive your company’s
overall health and performance. Not to sound negative…but for you who would
prefer to operate your business with your eyes closed (so-to-speak), try this:
Get In Your Car, drive it on the freeway at 90mph and close your eyes for 3
minutes. “Why would I do that” you say. Excuse me for the arrogance, but if you
run your company that way…..why not drive that way, you dare-devil you.”
Allow me to end on a positive note.
Your business can be healthy in a down economy all because you are
willing to make the commitment and investment to make it so.
Want Help? I’m available
Written by Ruben A.
Estrada Founder / CEO Estrada Strategies Franchise Inc
“A national
business coaching Franchise Company”
Ruben@EstradaStrategies.com
www.EstradaStrategies.com
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