Everyone Should Have a Budget. Period.

Over the last year and a half, as I’ve been meeting and speaking with small business owners and nonprofit leaders, one thing has amazed me. I’m always surprised to learn how many businesses do not have a budget. Either they are small enough that they don’t see the point. Or they have never had one, so why start now? One for-profit business told me that their entire purpose is to make money and who needs a budget for that? Maybe most concerning is when the leader has a strong understanding of the finances, but they just keep it all in their head. 

Allow me to explain why I believe everyone needs a budget. This goes for nonprofits, for-profits, and even your home finances. A budget is simply a plan; with numbers. Most business leaders, whether they write it down or not, have a plan for their business. They know that they want to grow, maybe add a staff person, possibly expand into new markets, etc. In order to do all these things and more, you need a plan. And more specifically – you need a budget. 

Why Avoid Budgeting?

It seems that many leaders avoid the budgeting process because of a fear of numbers. People decide early on that they are “not good at math.” And that leads them to steer clear of anything with numbers. This is why it can be helpful to think of a budget as a plan that you assign numbers to. With modern technology, a simple Excel or Google Sheets workbook can be designed to do all the math for you! If that’s too techy for you, a piece of paper and a calculator will do the trick too. 

Another reason leaders disregard budgets is that they do not want accountability. A budget tells you what you should be bringing in and what you should spend. That creates stress and frustration for some. Keeping in mind that you’re the boss of your business can be reassuring. YOU are the one holding yourself accountable! 

Along the lines of accountability, people will forgo a budget because they think they need to be able to predict the future. Meteorologists can’t do that, and neither can you. Fortunately, no one actually expects that of you. However, based on your knowledge of your industry, of your business, and of trends, you CAN be expected to make educated assumptions. If you’ve been growing steadily for 3-years, it can be reasonable to expect that trend to continue. If you’re in a more volatile industry, you might have to work harder to see trends, or plan for ups and downs. It’s not predicting the future, it’s developing a plan based on your expertise. 

Creating and following a budget will empower you in the following ways:

  • Making sound decisions
  • Educating you on what is really going on in your business
  • Helping you control your spending
  • Identifying problems
  • Being proactive

Making Sound Decisions

Business leaders make decisions every day. Everything from the epic to the mundane. Your ability to make really good decisions will likely determine how long you stay in business and how successful you will be throughout your career. Fortunately, you have at your disposal a super-power-like tool that can help you to make great decisions. And, you guessed it, that tool is a budget. 

Think you need to add a staff person to improve production? A budget will tell you if and when you will have the finances to make that addition. Thinking about expanding a product line? Your budget will tell you if that’s a good idea or not. Want to give raises to your amazing employees? A strong understanding of your revenue and expenses will make it clear when and how much will be appropriate and responsible. 

If nothing else, the process of creating and monitoring a budget will give you a strong understanding of where your money is coming from and where it is going. With super-powers like that, confidence in your decision making abilities will go through the roof!

Educating You on What’s Really Going On

As stated above, a budget puts your finger squarely on the pulse of your money’s comings and goings. It will tell you which product lines are kicking butt and which ones are under-performing. The amount you spend on staffing will become crystal clear; not just in terms of salaries, but also taxes and benefits. You will understand the true cost of doing business. You can even break it down so you know how much it costs to produce each item or service you sell. 

Over time you will be able to see if your business is going in a positive direction or a negative one. As you develop your budget you will be able to see how things look for your year. From there you can make decisions that can help make your year look better. If your budget for the year doesn’t show revenue covering expenses, you know this up front and have the ability to change plans. You can also build-in decision-making check-points. For example: If things are still trending up after the first quarter you may want to plan for additional investments. 

Helping You to Control Your Spending

If you are not tracking your expenses, you are definitely losing money. There’s an old saying: What gets measured gets managed. It might not be much. A few dollars here, a few there. Not knowing where your money is going can really add up. A great example is the daily coffee many people indulge in. Even if you go econo-coffee from the local convenience store, this likely amounts to $5 to $10 per week. Left unchecked, that’s over $500 a year! What would it look like if you saved or invested that money instead? 

If a daily coffee is important to you, keep it in the budget. This is not intended to anger the coffee drinkers! The purpose of a budget isn’t to take away things you need or really want. Rather, it shows you where your money is going. You are likely spending money without realizing how quickly it adds up, or considering what you can do with that money with a little bit of planning and intentionality. A budget brings bad habits to light and allows you to do something about them.

Identifying Problems

In addition to teaching you what you are spending money on, a budget can help you find problems. This is how embezzling is discovered! Does something seem off, but you can’t put your finger on it? The power of a budget will help you figure it out. By comparing the amount that should be coming in with the actual revenue you can find discrepancies and dig in. If spending seems off, your budget will help you root out the source of the added expenses.  

As this suggests, it’s not enough to just create a budget. You have to put your eyes on it. A monthly review is best. Once a month look through and see if your actual revenue and expenses are on track with the plan you created. If so, do a little happy dance! If not, you will be able to make decisions that will get you back on track. (This monthly comparison also allows you to monitor changes in trends so you can make great decisions.)

Being Proactive

Finally, a budget gives you the power to be proactive about the future of your business and your life. Whether this is in the area of saving for emergencies or planning for your retirement, a budget makes saving possible. A survey from Bankrate.com revealed that over 80% of people are not saving enough for retirement and 20% are not saving anything at all. 

A mistake often made is that people “plan” to save “whatever is left over” after all expenses are paid. As you may have guessed (or experienced), that’s not a plan at all. With that approach, nothing will ever go into your savings. And when there is an emergency, your business may not survive. By putting together a budget, and planning to save for emergencies and retirement, you are much more likely to invest in your future and the future of your business. By including ALL of your expenses in your budget, you will know what it really costs to run your business and support your life. 

Numbers do not lie. They are not there to make you feel good or feel bad. Using a budget makes you knowledgeable and in control of your business and your life. Wield it as such. 

I am not necessarily a “numbers person.” But I do love a good plan and a solid spreadsheet. I also love making good decisions with as much information as possible. This is why I’m a budget superfan! If you are interested in receiving a budget template, email me at Kim@Athena-CoCo.com. I can also help you to transfer your plan into numbers and set you up with a budget that works for YOU. Let’s connect!

Kim Stewart

Kim is a mom, wife, lover of being active and the outdoors,
and helper of small businesses and nonprofits.

The Biggest Mistake Leaders Make

bananarama quote

This is obviously an opinion article. Much has been written on the mistakes of leaders and there are varying opinions on which ones are the most egregious. Why is that? Probably because as leaders, we all make mistakes. And, people who observe leaders all have a different take on which mistakes result in the most negative impact.

Before I share what I believe to be the biggest mistake of a leader, I want to be very clear that I am a big fan of mistakes. So much so that I make them all the time! We make huge progress by trying lots of new and different ideas to see what works. In exploring what DOES work, we have to go through a lot of what DOES NOT work. We learn so much from mistakes. Often the lessons we learn from the mistakes we make are the ones that best stick with us and teach us how to move forward in a better way.

By writing this article I am not looking to create leaders who are risk-averse. Quite the opposite! I want you to keep trying new things and making big decisions, and exploring new opportunities. The biggest mistake we make is not really a thing we do. So please, keep doing and trying and exploring.

Decision Drift

If it’s not a thing you do as a leader, what is it? The biggest mistake I see leaders make is mixing up their roles when making decisions. We all fulfill different roles. One of those is probably a company leader. Another might be a spouse or family leader. You may also be a community volunteer and leader. Maybe you have more. Most people have two big categories of business leader and personal-life leader. And sometimes it can be difficult to keep your focus on making decisions appropriate to your role. I call this Decision Drift.

Decision Drift is when you should be wearing your “leader of the company” hat, but you let your “leader of my personal life” hat slip into your decision making. When a leader makes a decision based on what is easiest for them personally, that’s Decision Drift. When a leader makes a decision based on which will cause them the least amount of personal discomfort, that’s Decision Drift. And when a leader makes a decision based on how much they will personally gain, you guessed it, that is Decision Drift. Those decisions have drifted away from what is best for the company.

Now, you might be thinking that this sounds crazy, and that no decent leader would make those kinds of decisions. But the challenge is that it’s easy to convince yourself that you are making decisions for the right reasons. Leaders will talk themselves into Decision Drift, and then they convince themselves that it’s not for personal reasons. For example, if there’s a difficult conversation that needs to happen, and the leader dislikes confrontation – they will convince themselves that it’s best not to have the conversation because it will have a negative impact on the culture. Or, maybe more often, when faced with a decision that will benefit the employees vs one that will benefit the leadership, leaders frequently convince themselves that the option that benefits the leaders is the right one, because they know best.

What are you being paid for? 

When you are hired as a company/nonprofit leader, or you are the leader of your own business, your role is to make decisions based on what is best for the company. Period. While it’s challenging to remove your personal interests from those decisions, that is what you’re paid to do. Or, if you are the owner, it’s your commitment to the success of the business and the people who work for you. The people who hired you and the people who work for you are counting on you to make decisions based on what is best for the organization, even if it makes you uncomfortable.

None of this is to say that you shouldn’t make decisions that benefit you personally. It’s just that those are decisions you make when wearing your “personal life leader” hat. In your personal life – you, your family, and maybe your friends are counting on you to make decisions that are good for you (and your family and friends). That is when you make decisions about what you’re comfortable with, what will be best for your life, and what will preserve and protect you.

Keeping those two decision-making categories separate is imperative to being a good leader. If you need to make a business decision that’s best for the company, but not so good for your workload or mental health, it leads you to needing to make a personal decision. Does the increased workload fit with the demands of your personal life? Is the stress affecting your family and friends? If questions like those are answered with a “yes”, it’s time for you to consider what you need to do personally to adapt to what is best for the company. This could be anything from adding in some self-care to changing careers.

There you have it. The biggest mistake I see leaders make is Decision Drift. They try to avoid having to make challenging decisions in their personal life by making business decisions that are best for them, rather than what’s best for the business. It’s easy to do. It’s better for you. But by doing so, you are not fulfilling your role as the leader of the company. You’re letting down stakeholders and team members. And you’re holding your business back from where it could go and what it could accomplish.

Servant Leader = a leadership philosophy in which the main goal of the leader is to serve. This is different from traditional leadership where the leader’s main focus is the thriving of their company or organizations.

If you look at this definition, you might think that I’m contradicting the concept of Servant Leadership. That’s not the case. I believe very strongly in Servant Leadership, and I think that it is a part of what I’m talking about. With some exceptions, the most valuable asset of most companies is their workforce. A Servant Leader knows this. Part of serving their team members is likely making decisions based on what is best for them. And very often what is best for the staff is also what is best for the company.

Google says. . .

A quick search of the biggest mistakes leaders make will give you several options of lists similar to this one:

  1. Micromanaging

  2. Leading from a position of power or ego

  3. Not listening

  4. Not valuing followers

  5. Failing to grow themselves as leaders

  6. Lacking boundaries

  7. Not providing or receiving feedback

I would argue that each and every one of these mistakes (and the similar ones that land on other lists) can be tied back to Decision Drift. Let me show you:

  • Micromanaging is often a mask for a leader who doesn’t know how to empower, delegate and build up their staff. Rather than pushing themselves to grow as a leader, they decide to use their time to nitpick their staff.

  • Leading from a position of power or ego – This comes from a lack of humility and confidence. Power and ego is used to mask personal deficiencies, rather than deciding to do the hard work of growing as a person and a leader.

  • Not listening – As a leader it takes a lot of confidence and security to be open to the ideas of others. Again, it’s easier to mask insecurities by pretending like you have all the answers, than to work on personal growth.

I could go on with the list above, but my comments would continue down a similar path. Decision Drift comes from a leader’s need to protect themselves, their time, their ego, etc. True leaders know how to separate self-preservation from organizational leadership, and make decisions in the company’s best interest. .

It’s hard to separate business decisions and personal decisions. Outside help can see the issues without the emotion that leaders bring. Email me at kim@athena-coco.com to schedule a free 30-minute consultation to see how we can help you make better decisions for your company and for you personally.