Via LinkedIn : There are some topics I stay away from in my training and consulting business.
It’s not only because it’s the right thing to do neither is it because I don’t have expertise or knowledge in some of these topics. But however much I try to stay away from some topics I still attract them like success to hard work.
For instance, take budgeting.
From the time some of my self-employed clients hear that I was an accountant in an earlier life, the question is almost inevitable: Can you help me to come up with a meaningful budget, Miss Barrow?
I usually say to them: I can…in a heartbeat. The question is: Do you have the guts to implement it?
That question should be a clue to the fact that my approach to budgeting is “somewhat” removed from what I learnt in business studies and what I had to submit to committees and boards over and over.
As a matter of fact, my approach is very much grounded in what I believe you must do as an entrepreneur or a self-employed person to give reality to the life you dreamed of, when you started your business.
Want to give my smart budgeting for the self-employed and the entrepreneur a shot? You’re sure? Well…here goes!
First of all separating your “business” and “personal” lives is not as desirable as is usually recommended. Nor is it as easy as accountants lead you to believe. When you are self-employed these distinctions are somewhat blurred and insisting on them in all cases leads to confusion and frustration on the part of the entrepreneur.
When I want to make a budget for me and by extension my primary business, here’s how I do it. You should give it a try.
First I decide on a period of time that I want to develop a budget for. Then I develop the expenditure side.
The Expenditure side
On the expenditure I begin with what I want and here are some of the items which I had in my last budget.
Goals and dreams – these are made up of what I would love to achieve (dreams) and specific things I have set myself to achieve in the budget period (goals). These are both for the business and myself and if I have to sacrifice any one of them it is usually the dreams. This is to prevent me from having too many nightmares.
New business ventures – my brain is always ticking over with new business ideas and I set aside money in any budget period for the one I believe I will bring to reality next. It can take as many as 3 – 5 budget periods before I have enough to start but if I don’t put it in the budget, I may never start.
Savings – for me savings is an expense. If you don’t make it an expense, you do not develop the habit of savings and it is savings that help you to live through those time when money isn’t coming as fast as you would like.
Philanthropic activities – If you don’t budget for these you could find yourself giving away the family silver. There is actually a cost to all those sessions you give to charity or all those events you sponsor and you should budget for them. Further, when you do, you don’t have to feel bad about saying “no” to another charity request. Instead, you can say “I have already exceeded my philanthropic budget for this year…”
Personal Development – Yes, this too. How are you going to grow your business if you don’t plan for and grow yourself? Not being specific and planning for personal development is a weakness that is all too common among Caribbean small business people and entrepreneurs.
Health and Wellness – when you are self-employed, it is very important to look after yourself because your business suffers if you are not well. And the approach that “prevention is better than cure” must be your guide.
Lick-out money – Aahhh! I love this! Writing this in my budget is spiritual to me. By actually budgeting money to treat yourself, to buy little fancy things for your office, to just “lick out” remove the guilt you feel when you treat yourself.
Further, budgeting for it gives you a serious measure of control, if you stick to the budget. It also reminds you that treating yourself does not prevent you from getting rich.
Your salary – I believe in paying yourself a salary, it is from this that you pay your personal expenses. I don’t make this too large to attract a high tax rate and I also know that many of my expenses can be charged to the business (remnants of the accountant in me).
Regular expenses – You know the stationery, the utilities, the rent, the mortgage etc. Don’t forget those annual expenses like car insurance, etc.
Now that you have identified your expenses, it follows that budgeting for income is pretty simple. You just have to set income goals to cover your expenditure goals and go out there and earn the money. Or is it?
For me, income projections are controlled by the basis on and the manner in which you allocated $$ amounts to the expenditure items. It is important to allocate these on the optimum combination of your needs and the benefits to be derived both for you and the business.
In this way, you isolate what is truly important so that the amount you have to earn is meaningful and realistic and can serve as a motivator to reach earning goals.
How you earn the money your budget indicates that you must, is up to you and how you leverage and combine your unique personal and business strengths.
For example, having identified my goals for the budget period, I decide which combination of the four ways to grow a business (info for another post) I will be leveraging to help me reach my income goals.
So there you have it…a budgeting process which I developed and use for myself. As far as I’m concerned, it’s’ a great budgeting model for the self-employed and entrepreneurs.
It is a complete antithesis to the popular nickel-and-dime-don’t-spend-more-than-you-earn approach. It requires you to be aggressive in looking for money-making opportunities – something that many entrepreneurs and self-employed people find hard to do.
It’s also very liberating and spiritual because you’re not constricted by the economy, the amount you made last year, what the “gurus” are making or even the average earning rate for your industry.
So go on…give it a try, and the next time you notice I’m avoiding a certain topic…now you know why.