Budgeting is key to scaling your business and is an essential tool that you should be employing. 

We have heard a number of reasons why some Founders and small businesses do not create annual budgets. Apparently for some people creating a multi-tab excel document does not rank high in ‘feel good activities’.

Here is a list of reasons why some businesses do not create annual budgets. 

• – They’re not fun
• – Time consuming and tedious
• – Impossible to accurately predict revenues
• – You had a great year so why bother
• – Assuming that everything is captured in dashboards, KPUs and OKRs
• – Cash is healthy 
• – Don’t want to restrict spending 

In the spirit of empowering entrepreneurs, we’ve put together 3 key reasons why you should consider creating an annual budget before another year goes by. 

#1: Businesses fail because they run out of cash

Cash is to business what oxygen is to life. Businesses can not survive without it. Furthermore startups and small businesses generally consume cash faster than they produce it, implementing healthy habits around cash management are essential. A number of startups and businesses launch without a financial plan and numbercrunching isn’t a theme in the early days of operations. In order to scale however, leveling up your business’ financial management habits to keep up with the increased complexity of juggling initiatives is a must. 

#2: Budgets are a financial roadmap for your business

Driving around in new territory without a map can be stressful. When you are scaling your business you are heading into uncharted terrain with a lot of unknowns, by setting out a budget in advance you are essentially mapping out your business plan which will be an essential tool to staying on course.  Your budget becomes your navigation system and although you’ll still find yourself off-roading from time to time you’ll have a good sense of when to pull back and put on the brakes to avoid driving off the cliff.

#3: Avoid operating in a state of constant crisis

Have you heard of the Eisenhower matrix?  It’s a method of prioritizing tasks on the basis of their urgency – helping to determine which activities are important and which ones do not deserve your attention at all.  The matrix is the brainchild of Dwight D. Eisenhower and one of his famous quotes is “Most things which are urgent are not important and most things which are important are not urgent”.  By establishing an annual budget you are planning ahead, strategically considering resource allocation and essentially stacking the odds that you’ll be spending more time on important activities and less time on urgent activities going forward.  Plan to avoid chaos and crisis. There will always be surprises but if you have already considered a variety of scenarios as you script your budget you’ll be more prepared for the road that lies ahead.

Learn more about how we can help you with your budgets and roadmaps.