Budgeting for the New Year

Welcome to 2023! Todd & Craig welcome WOW Video Tours CFO, Derek Mayer, to discuss setting up your company budget for the new year. What really IS a budget? Why should you use one? How do you create one? Derek shares some easy to understand advice and direction to help you get your company started off on the right foot financially as you manage and grow your business another year.

 

Show Summary:

0:00-0:18 Sneak peek

0:19-4:18 Intro to Derek Mayer

4:19-13:34 What is a budget?

• Budgeting is about being proactive and trying to hit your goals
• It’s about looking at every aspect of your business - revenue, products, expenses, staffing, investments
• Step 1: What are your goals? What do you want to achieve? 
• Set your budget around profit goals
• Personal goals are important as well - do they affect your business? 
• You want your business goals to work with your family goals instead of fight with them
• Step 2: “External Considerations” - What is happening outside that would impact your business or goals? What is the market like?
• Most boards of Realtors have Market Updates you can view
• External considerations
• Step 3: Project revenue - How much revenue do you think you will get in the next year?
• Based on economic considerations, current Average Sale Price (ASP: total revenue/total number of jobs), and number of jobs 
• What is a realistic amount of growth? What has been your pattern of growth in the past?
• Keep your goals as realistic as possible; unrealistic goals can cause overhiring or underhiring and wreck your profit

13:35-24:17 Know (from the past year):

• Gross revenue - How much you receive from the client; all of your sales
• The more data you have, the better (Derek usually looks at the past three years of data)
• Total number of jobs
• Your ASP (gross revenue/total number of jobs)
• The fun part (according to Derek) - Step 4: Expenses
• Revenue and growth do not equal profit
• Wow’s lean budget strategy: Every expense should be reviewed to determine if it is helping the company grow and/or costing the company money
• Ask: 
  • Why did we spend this? 
  • Do we need to spend this? 
  • How is this helping the company grow? 
  • If we remove the expense, what would happen? 
  • Are there tools or automations that would eliminate this expense? 
  • Will this expense change at any point during the year? - Ask vendors if their prices will change or if they have discounts
• Step 5: Bottom line - After combining projected revenue and expenses, does the resulting number align with your goals and make sense for you?
• If they don’t, you will need to increase revenue or cut expenses
• What is your action plan to do that?
• Ask your clients what would help them
• Step 6: Review your budget monthly and make changes as needed
• The most important part of creating a budget is taking the first step

24:18-28:52 Contact Derek by email at derek@wowvideotours or by phone at 937.505.0444

• Use Google - search “small business budgeting”; Derek prefers Google drive
• You have to make the time to do it
• January is a great time to start but it’s never too late
• Accounting software can be helpful; Spiro is helpful in tracking data
• For those who don’t enjoy numbers, a budget plan allows you to lay the foundation to dream and create a vision

 

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