Page 187 - Budgeting for Managers

Budgeting for Managers
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Learn from the Best
There are many good books on writing business plans. My
own favorite is Business Plans That Win $$$: Lessons from the
MIT Enterprise Forum by Stanley R. Rich and David E. Gumpert
(HarperCollins, 1987).The MIT business forum allows entrepreneurs
to present their business plans to venture capitalists, who then cri-
tique the plans and give advice for making a good business plan, getting
venture capital, and succeeding. My favorite part of the book is where
it asks probing questions that help you understand your reasons for
starting a business so that you can decide if it is really right for you.
Starting a business takes all that you have to give, and the more you
know going in, the better.
bers in the business plan, and then we track the progress of the
business by comparing actual figures with the business plan.
Estimating Business Income
Creating a realistic, accurate estimate of business income is the
biggest challenge of setting up a business plan. It is easy to
think, “I’ll work 40 hours a week, charge $100 an hour, and
work 50 weeks a year. That’s $200,000 a year.” It may be easy,
but it’s also completely unrealistic.
First of all, when estimating income, you don’t estimate how
much work you will do. Instead, you have to estimate how
much money other people will pay for the work you do—or for
the things you will sell. Second, if you work 40 hours a week for
pay, when will you find time to run your business, do marketing
and sales, and take care of problems? You might think that you
can just hire other people to run the office for you, but that just
doesn’t work. Managing people takes time, especially in a small
business. When I bring employees into my company, I tell them
that I want them to reach the point where they can work 10
hours for every hour that they spend with me. But very few
employees are able to be that independent, that flexible, and
that self-directed. Usually, you end up spending an hour with
each employee for every four hours they work—and that’s when
there are no problems.