Budgeting… The First Step to Trade Business Financial Freedom
When you’re running a trade business, it’s easy to get caught up in the day-to-day business activities. You’re constantly answering phones, dealing with customers, paying bills and much more. So much so, that you completely forget about the bigger picture and lose sight of the end goal… To develop a profitable, prosperous trade business.
In order to do this, you need to set aside some time for planning… particularly financial planning. And the first step is…. BUDGETING.
It may sound simple, but going back to the basics by analysing your businesses finances and expenditures on an annual basis (at the minimum) will not only guarantee you are in CONTROL of your finances, but you will also end up SAVING money.
What most people don’t understand is that there are multiple types of budgets you can take advantage of as a business owner…. here are our Top 2 picks for you to get started on TODAY!
- Sales Forecast/Revenue Budget
Your sales forecast/revenue budget focuses solely on the money you predict the business will make for a given period. For example, predicting the dollar value of sales for the next year, broken down by months in that year.
Depending on the type of business, the following topics will need to be considered.
- Past sales
- Pricing structure
- Types of customers (ABCD customer market segmentation)
- Customer Avatar
- Monthly or daily targets
- Geographic area you service
- Economic environment
- Sales capabilities of staff (not just their skills but also the number of working days/hours per month/day)
- Expense Budget
This budget lists the primary activities and expenses undertaken by your business and allocates a dollar amount to each.
You will need to consider the following expenses along with any other additional costs your business incurs:
- Vehicle expenses (registration, petrol, servicing, branding & general upkeep)
- Supplier rates
- Mortgages/leases (on property and tools/machinery alike)
- Payroll expenses (both your staff AND yourself!)
- Amenities bills
With your sales forecast/revenue budget set, you can review your expenses to ensure expenses are LESS THAN your sales forecast/revenue budget.
If your total expenses is larger than your forecast/revenue budget, you will need to cut costs… and ASAP!
Start with taking advantage of payment terms offered by suppliers. CLICK HERE to read our previous article on how you can cut costs quickly.
These two types of budgeting are only the tip of the iceberg when it comes to financial planning for your business. Interested in learning more?
Come say hi at our Next Level Tradie event in Brisbane, Melbourne, Sydney, Perth & Adelaide where we will discuss the EXACT forecasting we use in our own plumbing business. CLICK HERE for more details and to claim your FREE ticket.