This is a short instructional YouTube video by Bob Gauvreau advocating that budgeting is the single most important tool for small-business financial performance. He defines a budget as a directional framework that sets revenue targets (broken into monthly/weekly/daily goals), catalogs direct and fixed costs, and provides benchmarks to compare actual results so owners can cut costs or adjust plans. The video emphasizes using granular targets (sales counts and average sale price) and ongoing monitoring to stay on track for goals such as a $1,000,000 revenue year.
Chapters
So let's talk about creating a budget for small business. And I'm going to take a step back here and just say, if I had to give advice for the number one tool that could support financial performance in a business and the success of that business, it would be creating a budget for that business. So let me talk about what a budget really is. Because a lot of times when we think of budget, we think of big corporations or we think of government agencies and how having spending related to a budget allocation, and truthfully, that's a component of it. But as a small business, what a budget does is it helps us outline the direction and the destination of what we're trying to achieve. So for example, if you've got a small business and you're looking at getting or building $100,000 or a million dollars in revenue this year, what are the costs that you're going to incur associated with getting to that level? You're likely going to have to incur some advertising costs, some staffing costs. You know, if you're in manufacturing or you're reselling, you're going to have to have product costs, inventory costs associated with getting there. So what we do with a small business is we establish the destination of where we're trying to head. And the budget gives us a framework and a benchmark for us to see if we're on the right path. So for any small business, setting up a budget or some sort of pathway to know that you're on track to achieving your goals is very, very important. So some of the components of a budget, if you've listened to me before, you probably have heard me talk about the financial model. We've got our revenue. We need to understand what our revenue goals are monthly, even down to weekly. What's our weekly budgeted target. So for me, you know, we are on a mission to accomplish some pretty big numbers. I have leads that are coming in that are part of my budget. I have sales calls that have to be booked part of my budget. I have closings that have to be part of my budget. Because if we're not closing deals and we're not bringing in new revenue, we won't hit those targets. I want to know down to almost the day of what our objectives are so that I can continue to see if we're on the right track. So in our small business, if, if we know that we're trying to get a million dollar year, this year in revenue, we need to understand the number of sales we have to make and the average sale price. In order to get there, we need to look at this at least on a monthly basis to say, yeah, if we're going to hit a million dollars, we probably need 50,000 in revenue. This much, maybe 55, 60, 65, 70, continuously growing in order to achieve that goal. And then we can build out the expenses associated with it. So inside the financial model, you've got your direct costs. So again, your wages, your materials, your vehicle costs, your subcontractors, anyone who's delivering for that revenue or delivering that revenue to the consumer, those are going to be our direct costs. And then we've got our fixed costs. So these are our regular ongoing rent expense, insurance expenses, maybe overhead related to utilities or staffing for admin. All of those are going to be relatively fixed expenses. We need to understand what those fixed expenses are so that we can again create a benchmark and compare what's actually happening to this budgeted figure. It will tell you where we're going over and it will tell you where we're under. If we're under, we need to focus on continuing to try and deliver those under results. Right? If we can do it for less, why can't we do it again for less? And then as we're watching our budget, if we have actual results that are coming in higher than budget, what's going on in here? Are there opportunities to cut some of these costs or do we have to adjust our fixed expenses going forward to say this is just the cost of doing business? A budget will give us a framework and a benchmark to track our success to realizing our goals. For me, this is the number one tool for a small business to incorporate into their business finances and the number one tracker to see if you're on track to achieving success.
