2020 Starts Now!
Create a plan for success
The fourth quarter is a busy time. Lots of business and personal demands dominate our schedule, making it difficult to accomplish everything we need to do. But let me add one more very important item to your list: create a plan for success in 2020. Yes, planning needs to happen before 2020 in order to make sure you maximize the potential of the upcoming year. Where do you start? Let me walk you through the creation of a budget for 2020.
Create A Budget
The best place to begin planning for next year is to create a budget based on the results you saw in 2019. Plan your income for 2020 by looking at your sales in 2019 and adjusting them for one-time (likely not to be repeated) large sales, or by the trend you are seeing over the last ninety days. If sales are trending up or down, adjust your projections for 2020 to reflect these trends.
Next, take a look at each operating expense you had in 2019 and make adjustments in those. Are you adding any new staff or giving raises this year? Is rent going up? Are you planning to buy new equipment? If so, adjust your expenses for 2020 to reflect those changes.
Subtract Expenses From Sales
Now, take your anticipated sales income and subtract those newly projected operating expenses from them. Is the difference between the two less than the amount you paid for materials to build your projects last year? If so, you may need to plan some reductions in your operating expenses or you may need to raise your pricing.
Divide Into Monthly Amounts
Next, take those yearly sales totals and expenses and break them down into monthly amounts. Do this by using the monthly results you had from 2019 while manipulating 2020 projections where changes will occur. Now you will have a monthly budget. As you fill in the actual results for 2020, you can see very quickly how your company is performing compared to the plan you created.
Planning now for next year is the key to avoiding some very unpleasant surprises next year. It also allows you to recognize times where you are out-performing anticipated results, giving you a chance to make additional investments in the things that are improving your performance. By creating a plan for 2020 and then comparing that plan each month to the results you actually accomplish, you can quickly react to needed changes as the year progresses.
If you’ve never created a budget for your company before, try it for 2020. I know it will give you a much better understanding of what is happening throughout the year.
“Creating a budget will give you a much better understanding of what is happening throughout the year.“