In this new year, don’t just take the hand that the market deals you. Now is the time to take charge for 2010!
 
A budget is the business tool that illustrates the vision for a company, division, department, or work team.  Many business owners tell me that they don’t budget, but compare to the prior year instead. It is certainly good to improve on the past, but comparing to 2009 in many cases will not be a good standard. You need a budget that shows you how to get to where you want to be, not just to tell you where you have been.
 
In developing a budget, the first and probably most difficult step is visualizing where you want to be when you want to be there. This needs to be figured in terms of sales units and sales dollars, broken down by month or quarter. Second, examine your assets (equipment, tools, vehicles, etc.).  Third, staff according to the functions required to support your vision.  Then, look at the overhead, with the focus on supporting the other items mentioned. I suggest starting with the back of an envelope to jot down your thoughts.  Then, decide what actions should be assigned to whom in order to meet those monthly or quarterly goals.  Throughout the plan, continue to ask the questions where, when, what, and who. 
 
A client recently purchased a business. He prepared a budget based on the sales history of the prior owner, using a two-page list of tasks for the marketing plan, cost reductions, and staffing improvements. On a recent follow-up, he stated he was on budget within $12 net income for the recent quarter, and expected to beat the budget in the future. He never referred to the prior numbers. 
 
The vision that drives the budget does not need to be cast in stone.  Assumptions and business conditions change, and new ideas resulting from these changes could lead to changes in the plan.  For example, a new influential customer may move into town, or a long-term customer may close its doors.  For this reason, I suggest having an original budget, as well as having a forecast to update the vision based on new information that develops during the year.
 
A formula for insanity is doing the same thing again and again while expecting different results.  Hoping for a better next year without a clear, detailed vision will leave you in the same place without a direction for the future.  So this year, take time to picture your vision, make some notes, talk through your ideas with co-workers, and place your vision into action for a successful 2010!