Over the next 3 weeks we will be helping you put together a plan for 2012.  This week, we’ll be examining our past.  In week 2, we’ll be focused on the present.  And, in week 3, we’ll be building for the future.  We’ll be examining our marketing, operations, and finances.

Make sure to revisit our post from Tuesday where we reviewed your marketing strategy in this past year and yesterday when we reviewed your operational structure.

Let’s continue!

Image: Creative Commons

Do an inventory of your financial results…

Financial results are the most important to me.  I could have amazing vision and an innovative service or product.  I could have done an outstanding job marketing my business.  I could have run my business operationally superior to most.  But, if I’m not profitable, those things don’t mean anything.

Finances are also a good benchmark for performance. It’s difficult to measure your marketing results.  But if your sales $ improved from 2011 to 2010 then you’re doing something right.  So, let’s examine how your business is running financially.

Take a look at your Profit & Loss Report (otherwise called the P&L.)  If you use accounting software you can print this from the report options.  If you don’t, go back and read my Accounting 101 series.

Here are some good questions to ask yourself:

• How is your profit margin?  Are you priced high enough for your business model?  Are your costs of goods sold (services rendered) reasonable?  OR – do you spend too much money on raw materials, labor, etc?
• Was your business profitable overall this year?  Did you earn the income you wanted from your business?
• Did you make your sales targets/goals?
• Did you stay within your expense budget?  Were there any unplanned expenses?  Do you feel that your expense decisions were good ones?
• Did your business take on debt?  Did it pay off business debt?
• Did you purchase new equipment?  Was it a worthy investment?

Now, make 3 columns on a sheet of paper and label them each: “Financial Factors, Strengths, and Weaknesses”.  Spend a few minutes listing strengths and weaknesses for the following financial factors:

• Profit Margins (This is your price vs. your cost to service your customer or produce goods)
• Setting sales goals
• Achieving sales goals
• Sales results for 2011
• Making expense budgets
• Keeping to an expense budget
• Expense results for 2011
• Debt acquisition (how you take on business debt)
• Asset acquisition (how you purchase big ticket items: equipment, computers, etc.)

Come back next week!  We’ll be taking a look at the present before planning for the future… what’s going on these days?

A holiday deal for you…

Throughout these 3 weeks, we’ll be offering $100 off The Simple Plan Exclusive which is our one-to-one partnership with small business owners to help build a business plan.  Simply visit The Simple Plan website to learn more about The Exclusive and enter the discount code “2012” when you enroll.  This offer is only good through December 30^th and space is limited to first-come-first-served.

Knowing your Numbers Step #8: Make a Budget

Budgeting is all about setting goals for your money.  Once you know how much you spent in 2009, you can plan for what you want to do in 2010.  Here are some questions to ask yourself when reviewing your 2009 expenses:

• Which expenses were too high?  How can you adjust these for next year?
• Which areas would you like to spend more money on?
• How can you cut costs?  Are there things you don’t need?  Items that were wasteful?
• Did you have expenses that caught you by surprise?  Can you plan for these in 2010?
• What do you want to do with your money?

After looking at your 2009 expenses, flesh out a plan for 2010.  Here is an Excel template to help you build your budget for the new year:

SageWeddingPros-MonthlyBudget

Knowing your Numbers Step #9: Make a Sales Forecast

If you need a refresher on: break-even sales, targeted sales,  average sale, and cost vs. expense… see this post where we explain more in depth sales planning.  If you’d like a template where you can simply plug in numbers to determine your sales plan and have the opportunity to play with your numbers, we created an easy-peasy download you can use.  Sales formulas are already set-up in Excel and will auto-calculate for you. Or, you can of course create your own spreadsheet and play with the numbers that way.  Here is our Sales Plan template download available for $10…

Knowing your Numbers Step #10: Plan for Asset Purchases & Debt Repayment

After determining how many sales you are going to make, you’ll be able to determine your net income planned for 2010.  What will you do with that money?  Will you reinvest it in your business?  Will you purchase new equipment?  Will you pay off debt? Will you reward yourself and withdraw it for your personal needs?  It’s up to you… but incorporate this into your plan.  Read more about planning for reinvestment and asset purchases here.

Soooo…

Do you see how powerful this is for making business decisions?  What are your thoughts?

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As we gear up for the New Year we’ve been working on preparing ourselves for 2010.  Last week, we had a series of goal-setting posts.  In goal-setting we made a list of 5 things we want to do in our businesses next year and determined SMART strategies for accomplishing these goals.  It’s equally important to think about how much we want to earn in 2010 – creating a financial goal for ourselves.  Without pinning down some of these numbers, you’ll have a harder time actually creating a profitable business.  Our mission is to help you create a sustainable enterprise in the wedding industry.

This week we are going to work on financial plans.  We are going to cover the following:

• Budgeting
• Sales Planning
• Investment/Purchase Planning

Let’s get into Budgeting today…

Knowing where you’ve been…

The first important step in budgeting is knowing your history.  You must know where you’ve been to know where you are going.  For this reason, it is important to keep good records of your expenses.  If you haven’t been good about doing this in the past, start now.  This is akin to eating healthy.  I’ve been guilty of putting on a few pounds this summer, it’s time for me to get on track now.  The same can be said of tracking expenses.  If you haven’t been good about this, start now… before it gets worse.

Earlier this year, I wrote about some methods that I like for tracking expenses and accounting.  My favorite of these is Quickbooks.  They now have an online version which is easy to use and easy to access.  It sounds like an intimidating program, but it is actually quite easy and user-friendly.  This is especially true if you don’t plan on learning all the nitty-gritty details about debits and credits.

Once you have a system in place for tracking your expenses, determine where you spent your money in 2009.   How much did you spend on the following aspects of your business:

• Advertising
• Office Supplies
• Staffing
• Professional Fees
• Marketing
• Education
• Travel & Mileage
• Other

Plan for where you want to be…

Budgeting is all about setting goals for your money.  Once you know how much you spent in 2009, you can plan for what you want to do in 2010.  Here are some questions to ask yourself when reviewing your 2009 expenses:

• Which expenses were too high?  How can you adjust these for next year?
• Which areas would you like to spend more money on?
• How can you cut costs?  Are there things you don’t need?  Items that were wasteful?
• Did you have expenses that caught you by surprise?  Can you plan for these in 2010?
• What do you want to do with your money?

After looking at your 2009 expenses, flesh out a plan for 2010.  Here is an Excel template to help you build your budget for the new year:

SageWeddingPros-MonthlyBudget

Tomorrow, we’ll discuss your SALES PLAN and define how much money you want to earn in 2010.

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This week, we are discussing start-ups!  In yesterday’s post, we discussed the first things you need to do when launching your wedding business.  We provided a handy-dandy checklist for you of 30 items that will help you start out on the right footing.  Today, let’s talk money, honey.

Money Matters…

When it comes to financing your start-up, these can be the greatest challenges you’ll face:

• Knowing exactly how much you’ll need to finance your biz
• Knowing what is important to your biz and what is less important
• How much things actually cost
• Investing in a “million dollar look” on “start-up pennies”
• Budgeting for uncertainties
• How your business will be financed

You HAVE to have a BUDGET!

So, I’m pretty much a stickler for having a plan.  And, when you are launching your business, you need to give yourself a budget.  Chances are you will be financing this venture on your own.  So, make your dollars count until you have some income.  These are some of the things you need to be budgeting for:

• Licenses
• Marketing design (logo and web design)
• Print collateral (business cards)
• Phone, Email, Fax, Website

We’re going to make this easy on you! We put together a Start-up Budget for those of you just getting started.  The free download gives you a very basic guideline of what you should keep in mind when planning your early-stage finances.  It also provides some guidance on what general price ranges you can expect to pay.  This list is by no means complete, and you’ll have to fill in the blanks yourself.  But it should help you get a basic idea of what you should be planning for.  You can download the Start-up Budget (in Excel) here:

Sage Wedding Pros – Start-up Budget for the Wedding Industry

Financing Your Start-up

After you build your budget, you’ll have to answer one BIG question: How do you plan on financing your venture? This is a doozy if you’ve already quit your job and don’t have much cash squirreled away.  My advice: keep your job until you’ve got some savings to launch your business.  Read this post: on How to Quit your Day Job.  Save what you can for as long as you can.  Do not go into debt to finance your business.  Debt is bad. Credit cards are evil.  Capitol One is not your friend.

If you want to take on investors, you may start with your friends and family.  But do it smart and do it carefully.  Have agreements and contracts for every investment decision you make.  I love Virgin Loans for this sort of thing.  The company that brought you Virgin Air now has a business built around helping facilitate “social loans” – loans that are made between loved ones.  Again, keep your relationships first and money second.  And – put it in writing!

Baby Steps…

Last but not least: it’s OK to take this slowly.  If you have big start-up costs, choose and prioritize.  Pick the things that are most critical and work on down.  Rome wasn’t built in a day.  Neither were any of the leading Fortune 500 companies… or even the awesome ones we see in the wedding industry.

Go on!  Budget!  Prosper!

psst… did you miss the Start-up Checklist Yesterday? Find the checklist here.

Creative Common License

What does the pinup model have to with budgets?  Well, while researching for this post, I came in contact with Mr. J Money who authors the blog Budgets are Sexy and I just couldn’t resist catching your attention with a sexy 1950′s pinup.

And, no this is not an April Fool’s Joke.

Advice from the blog Budgets are Sexy

J Money’s site targets personal finances, but there are some relevant points that apply to most small businesses.    His advice is as follows:

• Track your spending for 3 months so you know EXACTLY what you spend and how you spend it.
• Create an emergency fund.  This is as important in personal finance as with small businesses.  As we’ve learned this year, you never know what is going to happen with the economy.  Spending on weddings is down significantly since last year, and people who have cash cushions are in a stronger place.  Sean Low of Preston Bailey Designs, Inc. recently talked on his blog about smoothing out cash flow to get away from some of the seasonal flux of our industry.
• Pay off all bad debt (eg. credit cards and lines of credit).  Debt has a huge negative impact on the cash flow of your business.  If you are paying off your credit cards (and the interest on them) you don’t have the cash to invest in your business.  Get rid of this debt as fast as you can and you’ll have the flexibility to grow your business in much more lucrative ways.

Budgeting = Goal Setting

I like to think of budgeting for my business as goal setting for my business’s expenses.  Ask yourself the following questions:

• What is it that I want to do with my money?
• What are my goals with my cash?
• What expenses do I have to pay each month?
• What expenses would I like to reduce?
• How much cash surplus (emergency fund) would I like to have?

By answering these questions, you’ll have a starting point for building your budget.  From here you can start to build your budget.

Tools to build your Budget

I like to use Excel spreadsheets or google spreadsheets to track everything.  Excel has some great templates that are easy to fill in:

BudgetSketch (www.budgetsketch.com) is also an AWESOME online tool that’s FREE.  It is also targeted at personal finances; however, it is easy to set up your accounts to reflect your business expenses.  It also allows you to collaborate with business partners and share your budget communication.

Bill Barnett and Dewayne Greenwood are the masterminds behind the program. And, I like the mission behind this business.  When I talked to Bill he said, “Dewayne and I wanted to create a simple, effective budgeting tool designed for one purpose only, to aid its users in creating a budget.  [It was designed] certainly not to make Dewayne and me rich at the expense of others. We look at it as our way of paying forward the lessons we learned about getting, and hopefully staying out of debt.”  What an awesome tool from these pay-it-forward guys!  (Thanks Bill and Dewayne.)

Did I mention that Budgetsketch is FREE?  (If it’s free, it’s me!)

What works for you?

The most important trick to budgeting is finding a system that works for you.  It might be paper and pencil or Quickbooks Budgeting Software.  But, find something that easy for you to work with… that you love… and that you think is SEXY!

Grandfather's expense book 1933-34 ccLicense

The first step to budgeting is knowing where your money is going.  Many of you probably save your receipts and promptly turn them into the accountant during tax time.  This is great, but you may not have an idea of where your money is actually going.

Let’s break down some easy-peasy ways to track your expenses.  You’ll need to schedule some time each month to work on this.  Think of this as a very important appointment with yourself.

The Old Standbys

These are the most widely used systems for tracking expenses, and happen to be what I use.

• Quickbooks is my favorite program to use, but it is expensive ($100-300) and can be tricky to learn.  I recommend this if you are interested in getting very detailed reports about your expenses.  I also think it’s essential to have something like this if you are tracking inventory.  If you don’t like numbers or don’t have very complex systems, then this is not the best program for you.
• Excel is also one of my obsessions.  (Yes, I am a total nerd.)  I love cells and rows and columns.  If you don’t have many transactions each year, excel is a good place to start.  It’s easy to use, and most people have it on their computers.  If you aren’t trained in excel, an inexpensive course at the local college will give you the basics.

The Rookies

These are new online programs for tracking expenses.  They are user friendly and, in some cases, FREE.

• Wesabe (www.wesabe.com) is a great online tool for tracking your expenses.  Wesabe allows you to link your bank accounts to the website.  From there, you can have a look at all of your expenses in one place.  You can tag and itemize items.  There are also great tips available for your planning.  Take a tour of Wesabe here.
• Mvelopes (www.mvelopes.com) is an online tool known for it’s ease with budgeting.  If you are a photographer and are saving up to buy a new camera, this system would allow you to save your money in a “virtual envelope”.  The program is set up for personal financing, but would work easily for small businesses.  You can try it free for 30 days and then enroll in a quarterly or yearly plan.  Take a tour of Mvelopes here.
• Your bank may have some easy online expense tracking and budgeting options.  Wells Fargo allows you to categorize expenses when you send payments using their bill pay.  American Expense often sends itemized bills showing charges and their classifications.

After tracking expenses for 1-3 months, you should have a good idea of where your money is going.  This will make your budgeting easy to do.  Tomorrow, we’ll share how to make a good budget and, how to stick to it!

This week we are going to cover the following to help you set up a budget, and more importantly, stick to it!

• The business expense MYTH
• Tracking your expenses
• Setting expense GOALS (budgeting!)
• Finding a system that works for you

A poor man's method for budgeting?

Now… onto…

The BIG MYTH

How many times have you or one of your fellow small biz owners said the following:

“It’s a tax deduction.”
“Oh – I’ll get this, it’s a tax write-off.”
“All of these expenses should make for a great tax refund.”

If you have uttered these words, listen (read) closely:
A business expense is a tax deduction.  However, a tax deduction does NOT mean the government is giving you any money or that you will ever see this expense come back to you in any form of money.

HOW TAX DEDUCTIONS WORK

Now stick with me… I’m going to talk in numbers (don’t be scared).

Let’s say in one week you make $1000, and you spend $800 of it on supplies, phone bills, and rent.  This is what happens:

$1000 sales
- $800 expenses
$200 income that you will pay ~$60* of tax –> $140 income (money in your pocket)

But, if you spent $500 instead of $800, it would break down as:

$1000 sales
- $500 expenses
$500 income that you will pay ~$150* of tax –> $350 income (money in your pocket)

By spending $500 in expenses instead of $800, you were able to make $210 more (after taxes).  The ONLY benefit to having more expenses is that you pay less tax.  The BIG downside to having more expenses is that you have less income (LESS money in YOUR pocket).

Now repeat this after me:
Tax Deduction means that I pay less tax.  Tax Deduction = Business Expense.  A business expense (or a tax deduction) results in less income.

You are a PRO!

Tomorrow, we’ll go over some AWESOME systems for tracking your expenses.  (Hint: there are some really cool, fun, online sites that make this easy-peasy.)

* For purposes of this example, the tax rate is 30%.  It would largely depend on the annual income and the individual’s tax bracket.