Page 189 - Budgeting for Managers

Budgeting for Managers
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• Supplies. If you import rare or specialized items, you can
sell only what you can find and buy.
• Delivery. You can sell only what you can deliver. Pizza
places often lose sales on rainy nights. They could make
all the pizzas that people order, but they can’t get them all
delivered.
• Logistics. This is a fancy word for the coordination of get-
ting supplies, putting things together, and delivering the
product or service. Whatever the bottleneck is in the pro-
duction and delivery, that’s the limit on how much you
can sell and how much money you can make.
• Expertise. Some jobs require experts that may be hard to
find and expensive to retain. In those cases, the limiting
factor is either retaining the expertise or the cost of that
expertise.
When you understand the bottleneck in your business—and
there always is one—then you can estimate your business
income.
The next step in a business plan is to define business opera-
tions: what work will be done, by what departments, with what
people? This will lead to your estimate of expenses. Then you’ll
need to define how you’ll acquire raw materials and supplies.
This will lead to your cost of goods sold budget. You should be
able to project minimum, likely, and maximum financial state-
ments for the first two or three years of business.
This is obviously a very brief introduction to creating a busi-
ness plan. Take the time to read, study, think, revise, and make
the plan as good as you can. Your financial projections should
be a result of the products and services you plan to offer and
the work you plan to do. Remember: numbers don’t create
numbers. A good budget is the result of a good work plan.
So, now let’s turn our attention to the details of a small busi-
ness financial plan. We’ll focus on the most difficult parts of the
financial plan and those parts that are different from general
management. So, if you’re planning to start your own business,
make sure you use all the methods and tips in this book, not
just the ones in this chapter.