October is one of my favorite months. Cool nights, warm days, little rain. The crunch of the leaves as I hike the woods makes me happy. The air smells good and the southernly tilt of the sun makes for interesting natural art as the leaves turn golden yellow or red. I spend as much time as possible outdoors taking it all in.
When I speak with fellow business owners this time of year, they often talk to me about how they are either landing or missing their current annual goals. I love those conversations, but for me personally, my most important thoughts in October are about planning for next year. There is nothing more exciting than the creation process of budgeting and planning.
Sounds strange, doesn’t it? You might think I love it because I am a geek, who just loves data. No, that isn’t it at all. What I love about budgeting is that, if done right, it is a creative process that engages your team and sets them on fire for the coming year.
But there is one secret to making it fun and creative. Start with the end in mind. Start with the 3 numbers that will ultimately define your results. They are:
- Sales in dollars
- Gross margin as a % of sales
- Net income as a % of sales
Once these 3 goals are set, everything else is a fill-in-the blanks exercise. As the CEO, it is up to you to set target 3. You are the investor in the company. It is your wealth that is at risk in this business, so therefore it is your job to define your expected return.
For goals 1 and 2, engage your management team and make it a collaborative process. Let them give you their ideas, you give them yours, working your way into a goal everyone can get behind and buy into.
Now that you have these 3 goals defined, engage the appropriate team members who manage the details. Who in your organization manages cost of goods sold? Who manages overhead? Who manages the components of overhead? To keep things on track, set a target of getting your first draft done somewhere between November 1-15. This way you have time to tweak and adjust as necessary.
At Mackey Advisors we love helping business owners think differently about prosperity, making it more engaging, dynamic and fun. If we can help you and your team turn your budgeting process into a creative and fun process, give us a call. 859-331-7755.