As the owner and operator of a small to medium sized enterprise (SME) you are undoubtedly familiar with the need to create a detailed budget for all aspects of your business. That said, this might be easier said than done – if you have no experience with business budgeting this might be an overwhelming and difficult task. Thankfully, there are a lot of tools out there that can help you – read ahead to learn more.
By compiling a strong and well thought out budget you will dramatically improve your annual revenue and get your business into the black much quicker than you ever dreamed.
How to budget for the year ahead
One of the biggest mistakes that SME entrepreneurs make is that they focus their budgets on too narrow a time period, worried about doling money to the appropriate categories over the next week and month more than they are concerned about the following year.
By budgeting for the entire year ahead you will increase your chances for success. Start by compiling a comprehensive sales forecast that prioritises and manages your sales opportunities and helps you expertly estimate your earnings for the year – which in turn determines how much you can spend. With this number in hand, you can begin to plan a year long budget that will see you through the next twelve months.
This is a much more involved process than you might think – after all, there will be many more line items and variables on this budget than on any typical household financial plan. No experience creating a budget for business? You are not alone. Consider contacting a professional accountant or bookkeeper in order to help you create this document, or simply have a look at the budgeting tools listed below.
Budgeting tools perfect for SMEs
Just because you have the great ideas, dedication and smarts to start your own company, that does not mean that you are automatically a whiz when it comes to maths, accounting and budgeting. Thankfully, a whole new generation of budgeting tools, software and apps are available that can help you create a budget, track your progress and keep you on target.
- Budgetao – Budgetao is a software package that has been designed specifically for start ups and small businesses, and it can really help you organise and plan your finances. It is ideal for people with no experience using budgeting software, and is incredibly intuitive and easy to use, and quite affordable at less than £40 per month.
- PlanGuru – This software will help you to do more than budget your finances; PlanGuru can also assist you with forecasting, and performance reviews, making this a multipurpose tool with many attractive features. They offer new clients a free trial upon signing up, and they can grow with you, as they have many clients who are managing multinational firms.
- PearBudget – PearBudget started as an Excel spreadsheet formula and has evolved and developed into a fully functional web and smartphone app. It has been voted easier to use than Quicken and Microsoft Budget, which may be perfect for you if you struggle with software use. Another benefit is that, as an app, it is very simple to keep track of your expenses while you are on the go.
What should you be spending on marketing and advertising?
While you are in the process of budgeting you may need to reconsider how much you are spending on your marketing and advertising. It is common for entrepreneurs to have difficulty when planning how much to spend on these vital components of a successful business, and many are unfamiliar with how to gauge a sensible ROI (return on investment).
Many experts agree that if your annual revenues are below 3 million pounds, you should be spending between 10 and 12 percent of your gross revenue on marketing and advertisement (that number drops to roughly 8 percent once your revenues increase past this number). This number should fluctuate depending on how competitive your industry is – varying between 3 and 20 percent.
Remember – marketing and advertising can drive money into your business, and so this should be a priority rather than an afterthought paid for after all other expenses have been fulfilled.
Using metrics to judge value of marketing and PR
Once you have allotted a specific amount of money for your marketing, public relations and advertising, and have implemented these strategies – you cannot sit back complacently and hope for the best. After all, this is your business, and your success rides on monitoring how effective your expenditures are in both the short term and over the long haul.
If you have outsourced your marketing and PR duties to an outside firm or agency, you must independently monitor their successes and not rely on the reports that they generate for you to see. While you may really value the friendly nature and quick customer service they provide, you do still need to use external metrics to judge their value and calculate the ROI of their services.
By using this simple ROI calculator you can determine just how well spent your money has been, and make adjustments when needed. Do not settle for a mediocre ROI – search for an agency or firm that has excellent reviews and proven track record of prooving excellent value for money.
By following this simple advice and prioritising your budget, spending wisely on marketing and monitoring your ROI, your business will have a far high chance of success.