The Secret Behind Thriving Businesses: Budgeting
Do you have a budget for your business? Is your business performing well? Could it be better?
We find many clients don’t have a budget, yet the budget process has the potential to considerably improve your business performance and profit.
As Business Advisors, one of the key tools we use in helping our clients make informed, reliable financial decisions is a budget. A budget will hold you accountable, provide clarity for all shareholders and allow you to make informed, reliable business decisions.
Principal, Chris Mullins, shares why budgeting is a critical element of the business planning process and the improvements that can be gained.
Please contact us if you would like help creating a budget for your business.
Video transcript
Chris Mullins:
Hi everyone. How is your business performing? Many clients come to us and say their business is traveling well, but could it be better? Do you have a budget in your business?
We recently had a client who had, what I’d say, is a very successful business, a fairly successful business. They turned over about $12 million, and they made about $600,000 profit. That sounds good by most standards. However, could it be better? We then recently went through a budgeting exercise for that client and discovered that business probably had the capacity to earn about $40 million in turnover and increase their bottom line from $600,000 to just under a million dollars. On a three times multiple that would increase the value of the business from about $1.8 million to $3 million. They are therefore leaving about $1.2 million worth of value on the table by not having the discipline and the rigor of putting in place an annual budgeting process.
This client has now set the standard in terms of what an at-stretch performance looks like. It gives them the discipline and the desire to go and sit down and do the annual exercise of a budget. Let’s face it, that’s not a lot of fun but it can deliver back in spades.
My name’s Chris Mullins from O’Brien Accountants and Advisors. We’re here to help our clients. We have a budget guide, which you can click on below and we can help you put together a budget and deliver that financial rigor and performance in your business that will deliver value for you and your fellow shareholders. Thanks very much.