New year, new wardrobe

The new financial year gives all businesses the opportunity to reinvent themselves and look optimistically towards the future. Yes, last year was tough with all the COVID lockdowns and added complexities of JobKeeper. But you’re still here and things are slowly getting better. So why not start planning and challenge yourself.

Budgeting was always a large part of my previous roles working with big business. But small businesses can also benefit from this process. It can help to focus the mind on what you want to achieve in the next year and how you are going to get there. Think of it as updating your business wardrobe. New year, new outfit. But where to start? Well, it could be as easy as a 4 step process.

1. Profit – How many leftover human monies do you want in your hand at the end of the year? This is after you have paid for everything, including a salary to yourself. Make it achievable but a bit of a stretch so you have something to work towards

2. Operating expenses – How much will you spend on everyday costs to run your business over the year? This number would include things like rent, wages, insurance, telephone, electricity etc. Use last year as a guide and find ways to reduce those costs this year. All the little savings will add up to more money in your pocket

3. Cost of Goods sold – These are the expenses that are directly related to your sales. For example, the cost of your stock, subcontractors, packaging and freight. Without these, you wouldn’t have a product/service to sell so they are harder to reduce. But sometimes a friendly chat with your supplier can reveal some savings. It doesn’t hurt to ask

4. Revenue - Add the first three steps up and you come to the revenue you need to achieve to get your result. Does your pricing need a new year overhaul to get there? Or do you need new customers? Once you answered these questions, break down the revenue into achievable chunks; quarters, months, weeks, days, whatever works for you. Then allocate those sales targets to a person. Give them sales KPIs

You have now set a benchmark for the year and will be able to track if you are close to achieving your goals. The next step is staying on top of your bookkeeping to measure your progress. There is no point in setting targets then being 3 months behind in checking how you are going. Historical data is great, but “the future is now, man”. And if you need help making over your business or taking your measurements for alterations, JOG are always here to offer you wardrobe advice.