Home Business Budget: Why Write A Budget

Posted on Posted in Small Business Finance

Why Write Home Business BudgetI have to admit that writing a budget is one area that has always been annoying for me. In saying that, I am not saying that it should not be done.  It is just that I am one of those people who like to set a sales budget and focus on achieving that knowing that if I achieve the sales I set I will be making a profit. Whereas my husband is one that wants a budget written down to the last cent and expects it to be adhered to.

My argument on that is that if you focus on the budget, and it is on the conservative side, then you are limiting your focus on achieving more sales!  In other words it is a negative view in that you will aim for that figure rather than a larger one.  I will leave that one for you to argue the pros and cons of!  We have never solved it in all our years of business but I can see the benefit of both points of view.

So Why Write A Budget

Firstly I would have to say that no business should ‘fly by the seat of their pants’ and if you do not have a budget from the very start, then that is exactly what you are doing.

You must have some reasonable idea of the sales you are going to make and the expenses you are going to run up to make those sales. You want to make sure that you are making enough sales, which will cover the expenses but also make you a profit ( from which you get your income).

If you don’t have any idea of either the income or the expenses then you are heading for a major fall right from day one.  You need to know what it is going to cost you each and every month.

  • If you don’t make the sales that you hoped then where is the money going to come from to pay the expenses
  • If you keep buying items and running up your expense account without making sufficient sales then not only will you not make a profit you will not be able to pay your creditors
  • If you can’t pay your creditors then you won’t get supplies and then you won’t have a business

This doesn’t sound too good does it, but it is exactly what happens and brings a business to a quick close. But on the other positive side of the coin, the fact that you do not have rent to pay commercial as a home based business owner (one of the biggest expenses to business) does make it easier for you to control costs.

The point is that if you have run up your expenses or you can see that is happening then you need to focus on sales, this is how you will overcome your cash flow problems. You need to take every step you can possibly think of to make sales.  If you are truly dedicated to making a success of your business you will be surprised at how innovative you can become with sales if you are in this position. Use this innovation to make sales now, but also capitalize on it in the future.

Don’t blame anyone else, this is your responsibility. A hard lesson, I know.  But it is one of the hard truths of having a home based business.

If you run into a hard financial position, swallow your pride and then get on and find out how you can make more sales.

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