As we enter the home stretch of 2018, most small busi­ness­es have already begun and final­ized the process of putting togeth­er their bud­get for 2019. Time for reflec­tion is over and most orga­ni­za­tions are look­ing for­ward to 2019 and achiev­ing all their goals.

Those small busi­ness­es who have a plan for next year have bud­get­ed what rev­enue will be, what gross prof­it will be, and what net income will be. How­ev­er, most of these small busi­ness­es stop there as just prepar­ing a plan for the next year is over­whelm­ing and exhaust­ing. Now these small busi­ness­es are left with a bud­get that they only use to see if they are on-track or off-track dur­ing the year. While this is a use­ful analy­sis for many orga­ni­za­tions, most do not take the extra step when devel­op­ing the plan for the next year that can dri­ve results with­in the orga­ni­za­tion and help the orga­ni­za­tion achieve their goals.

The next step I am refer­ring to is spend­ing time assign­ing respon­si­bil­i­ties and action steps required to meet the plan. What exact­ly does this mean? Well, let’s take rev­enue for exam­ple. If you plan on gen­er­at­ing $2 mil­lion of rev­enue in the next year, how are you going to achieve this plan, who is respon­si­ble, and what action steps will be required of every­one to meet this plan. How much of your plan is already sold for the next year and how much is required to be gen­er­at­ed from new busi­ness or increas­ing rev­enue from exist­ing cus­tomers? Just this sim­ple exam­ple could involve mul­ti­ple peo­ple from mul­ti­ple depart­ments with­in your orga­ni­za­tions. The sales depart­ment may be respon­si­ble for gen­er­at­ing new busi­ness, while your exist­ing oper­a­tions team may be respon­si­ble for deliv­ery a qual­i­ty expe­ri­ence and increas­ing rev­enue from exist­ing customers.

It is very impor­tant that every­one on your team know exact­ly what they are respon­si­ble for and what the plan is for the next year, so every­one is work­ing towards the same goal. It is also impor­tant as you begin to ana­lyze your bud­get ver­sus actu­al results because with­out a detail action plan you may miss the true root cause of a prob­lem. If you are lag­ging in rev­enue with­out a detail action plan you might think the sales depart­ment is the prob­lem because they aren’t bring­ing in new busi­ness, but in real­i­ty they are bring­ing in new busi­ness that exceeds the plan, and the real prob­lem is the oper­a­tions team is not deliv­ery on the qual­i­ty aspect, caus­ing a loss of rev­enue from exist­ing cus­tomers that wasn’t planned for.

So, while hav­ing a bud­get is very impor­tant, with­out tak­ing the next step and devel­op­ing action plans and assign­ing respon­si­bil­i­ties to each line item in the bud­get, you are not tak­ing full advan­tage of how a bud­get can help dri­ve your orga­ni­za­tion to the next lev­el and meet its goal for the upcom­ing year.

As always, if you have any ques­tions or would like to learn more, feel free to reach out to any of us at Mack­ey Advi­sors (859) 331‑7755.