Budgeting Essentials: The Importance of Budgeting
Coach Dan Dollevoet walks us through the less obvious value of budgeting, and why small budgets should make one even if they feel they have their finances in order.
I get it. Most of us didn鈥檛 start our businesses to become CFOs. But after working with hundreds of entrepreneurs, one thing is clear to me: if you鈥檙e not budgeting, you鈥檙e building your business half-blind. And that鈥檚 the fastest path to burnout at best, and insolvency at worst.
Budgeting gives you control, keeps you on track, and serves as the bridge between your day-to-day operations and your long-term vision.
Budgeting Gives You Direction
Every decision in your business should support where you're trying to go, a budget allows you to understand that path through the lens of the most important thing a business has, cash flow
Lots of business owners assume they are on track because they鈥檙e making sales, but never think about how much they鈥檙e spending to make those sales. They can鈥檛 plan ahead, because they can鈥檛 predict how many resources they鈥檒l have a month from now.
This blindness leads them to misprice potential investments, because they can鈥檛 understand the real costs of their action.聽
A good budget doesn鈥檛 just tell you what you can afford, it shows you what鈥檚 worth investing in. It aligns your spending with your strategy.
It Puts You Back in Control
I can鈥檛 tell you how many business owners I鈥檝e seen fall into this trap, 鈥渆arning鈥 more and more, while making less and less.
How can something like this happen? Because they鈥檙e not measuring what matters.聽
A good budget solves this by helping you:
- Identify where your money鈥檚 really going
- Spot expenses that no longer serve you
- Forecast upcoming needs before they become emergencies
- Make smart adjustments as circumstances change
With these insights you won鈥檛 be caught unaware.聽
It Keeps Your On Track
Most budgeting mistakes come down to one of two things: being overly optimistic or failing to adjust.聽
That鈥檚 why I recommend reviewing your budget monthly. Do a quick variance analysis: What did you expect to happen? What actually happened? What needs to change?
Think of your budget like a GPS. You might take a wrong turn here or there, but as long as you keep checking the map, you鈥檒l get to where you want to go.
When you think of budgets this way, you start to realize that it鈥檚 less about creating restrictions than it is about providing the context for freedom.
Without this clear context on your finances, every decision feels like a guess. But with a plan in place, you can take action with confidence.
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Dan has 25+ years of experience helping businesses improve and optimize their operations. He combines his financial analysis and planning expertise to solve problems and help clients increase profitability.
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