Page 195 - Budgeting for Managers

Budgeting for Managers
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I prefer an approach called honest business or the open book
approach. There are many ways of delaying making payments
by hiding things, such as saying the check is in the mail or your
bookkeeper is ill. Instead, I prefer to be straightforward about
problems and solutions. I find that, when I am, most people want
me to succeed and are willing to work with me for a good solu-
tion. A good vendor knows that allowing a delayed payment now
earns my loyalty later when my business grows and I want to buy
more. Consider running your business in such a way that if every-
one knew all the details, no one would have any complaints.
Setting Prices
Marketing meets budgeting when we set prices for what we sell.
Setting prices is complicated; it’s important to look at possible
prices from four perspectives:
• The buyer’s perspective. If the price is too high, then it
will not be worth the cost to the buyer. Make an effort to
determine the hard dollar value of what you sell to your
buyers.
• Your own company’s perspective. If you sell for too little,
then you will lose money, even if sales are high.
• Your competitors’ perspective. If you charge more than
your competitors, then why should anyone buy from you?
If you charge the same, how will you distinguish yourself?
And, if you charge less, will they cut price to match your
price, creating a price war where no one makes any
money at all?
• The market perspective. It is good to understand the rela-
tionship of supply, demand, and price. It’s hard to predict
how prices will change in the future, but you should put
some thought into it.

Budgets for Customer Proposals

Sales meets budgeting when we prepare proposals for our cus-
tomers. In some businesses, we don’t set prices or we don’t pub-