There is a Starbucks in your neighborhood—I know that because there’s a Starbucks everywhere. Walking by that Starbucks are two people. The first is a homeless person. He has 5 one-dollar bills, 3 quarters and a dime in his pocket. He looks into the Starbucks, sees the $4 cup of coffee and says to himself, “I really want that $4 cup of coffee but I don’t need it” so he walks on. The second person is a suburban house wife. She has lots of cash in per purse lots of money in her checking account. She looks into Starbucks and sees the same $4 cup of coffee and says to herself, “I need that $4 cup of coffee.” She goes in and buys it. Your business might be doing over one-million dollars a year in revenue. Unless you are a drug dealer you cannot imagine what that $1,000,000 would look like piled up on your desk. All you know is that you have a lot of money but you are frugal and only buy what you need. The problem is this: The difference between a want and a need is the balance of your checkbook and you can’t even really imagine how much money that you have! We all know people who as their income increases their expenses go up even faster. The cell phones, video games, big screen tvs—all those things that they only want they now think that they need and only because they have more income. You cannot run your business based upon what you want or need you must run your business based upon what you can afford!
A budget is a financial plan designed to produce a pre-determined, desirable result. When properly done, your budget tells you what you can afford.
Your office manager just got a raise. He now knows from his budget that he will be able to afford a new television and a new sofa. He also knows that he cannot afford to buy them all at once. Your cash flow forecast tells you when you can afford to purchase those things that your budget tells you that you can now afford. If you do not have a functioning budget and cash flow forecast you are merely operating from your gut. Over time your gut gets pretty good but as you business grows, “pretty good” is not good enough. Check out the Working With The Fremont Group Page. We can get a qualified consultant for you who will develop these tools and teach you how to use them. Give us a call today: 303 338 9300.