Page 186 - Budgeting for Managers

Small Business Money Management
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A Business Is More than Money
As a consultant, I’ve reviewed many business plans. Some
set goals of serving customers better, serving more people,
or offering a new and valuable product that will improve people’s lives
or make business easier. Other business plans, however, focus just on
money:“increase revenue by 50% in three years” or “cut expenses and
increase net revenue by 30% this year.”
In my view, purely financial plans are not good business plans.
Businesses do make money, but not if that’s their main purpose. Money
is a side effect of serving our customers.When we do good things for
our customers, we count the money as the measure of our success.
plan. A business plan should be a plan for your business. What
will you offer your customers? What are your goals? How will
you make money? How will you spend money? How will you
grow?
The business plan should be a guide for your business. It
should define the services you offer your customers and the ben-
efits of those services. It should define the work you will do and
the people who will do it. At the most detailed level, it should
define benchmarks—the key measures that determine if the
business is in good shape. Is enough work coming in? Is enough
money coming in? Are expenses as low as you expected? Do
you have the inventory you need? We define those num-

Don’t Believe Your Own Numbers
When we write a business plan, we’re excited about what
we hope to do.And a business plan is a marketing tool: we
want to get others, especially investors, excited as well.All of that is
well and good, but it can lead to inflated estimates of income and
unrealistically low estimates of how much time and money it will take
to get the business started.
When you build a business plan, plan for the worst as well as the
best. Don’t get caught up in the mistake of being certain that every-
thing will go great and the business will grow without problems. It may
look that way on paper—or in a four-color presentation—but, if you
want your business to succeed, you need to have a plan that allows for
things to take longer, cost more, and be more complicated than you
would expect.