We’ve always been told to set a budget and stick to it. Yes, planning for expenses based on income does help you avoid overspending. But sometimes a rigid budget can actually stunt business growth. So how do you plan a smart budget that keeps expenses in line and still leaves room for expansion? Here are a few ideas to help you measure for success.
When to stick to the budget
Budgeting must be a major part of any business plan. Create a standard measure to determine what is a true need (and what is merely a want) for operating your business successfully, and then set a hard budget. When exciting new tools or opportunities present themselves, consider the value of your potential purchase. Maybe you’re evaluating project management or CRM software. Do you need the top of the line model or is middle of the road a good fit for you?
When to ditch the budget
When you start a new business, your income is very small, so your expenses must be small as well. But eventually that small budget will limit your ability to grow. An industry powerhouse obviously doesn’t operate on the budget it set back in the early days. As the company grows, the budget grows in kind. For example, a startup is looking to outsource lead generation, but they have limited funds allocated for this expense. They should set an initial budget with the firm they contract in order to start the process. As leads pour in and are converted to sales, the budget should gradually increase to generate more leads and more sales.
When to take baby steps
Budget changes don’t have to be a complete overhaul of your entire business plan. Look for ways you can make small increases that directly contribute to the growth of the business. Regularly monitor the whole process to stay keenly aware of where each dollar is going. If expenditures begin to outweigh the growth, you can once again start to limit your budget.
Caution and monitoring need to be your strongest skills in balancing a growing budget. And don’t forget to thank your hard working employees every now and then. Donuts and coffee make an inexpensive (budget-conscious) thank you for the folks who help make your dream happen.