Planning Archives - Athena Coaching & Consulting

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 is a mom, wife, lover of being active and the outdoors,
and helper of small businesses and nonprofits.
kim@athena-coco.com

The Problem with SMART Goals

Here we are! Summer is winding down, kids are back in school, football is in the air and crisp mornings are telling us that fall is almost here. Mother Nature is about to switch out her palette of brightly colored flowers, grasses and trees for the more muted earth tones that come from the changing foliage. I hear many people say that fall is their favorite time of year. And who can blame them!

In addition to the relief from the heat of summer and the beauty that comes with fall, I have another theory on why we all love fall so much. With fall comes a return to normalcy. We get back into routines. And it gives us a chance to dust off goals and projects that got lost in the busy-ness of summer. It’s similar to New Year’s Resolutions, but without all the hype and dead-of-winter-gloom.

As we refocus our attention on our goals, I thought it would be a good time to talk about the issue I have with SMART Goals. Before I do that, I want to give credit where credit is due. Many of you have probably heard of SMART Goals and possibly used them in planning. It’s been around long enough that we may forget that someone originally coined the phrase and started using it as a framework for goal setting.

SMART Goals are coming upon their 40th birthday this November. Happy Birthday, SMART Goals! George T. Doran is credited with originally writing about the acronym. George was a consultant and Director of Corporate Planning for Washington Water Power Company in Spokane. He published a paper called “There’s a S.M.A.R.T. Way to Write Management’s Goals and Objectives.” You can read the original article here if you would like to continue your history lesson.

SMART Goals

In case you are not familiar with this concept, here’s a brief overview. The letters serve as an acronym for five elements that go into setting good goals. The original letters represented the following word/concepts:

S – Specific = area for improvement
M – Measurable = quantity or progress indicator
A – Assignable = who will be accountable
R – Realistic = reality check on whether the goal is achievable
T – Timely = when results will be achieved

As with many acronyms, the words have changed a little over time. In this case the two words that have gone through an evolution are the “A” and the “R”. In today’s application the “A” usually stands for Achievable or Attainable. The “R” fluctuates between its original word and Relevant. These are good changes. It has allowed the system to be used in many different areas of life, rather than just applied to the business world.

As for the “R”, I’m fine with either Realistic or Relevant. When coaching a client on their goals, I prefer to use Realistic. It leads to some really good conversations about how the person is going to make their goal a reality in their life and how the changes will fit with everything else they have going on.

The problem I have is really with the “A”. Set right in the middle of the acronym, it has so much potential! Unfortunately, all the words that have been assigned to the “A” fall short of really helping people reach their goals. Let me give you an example.

The Problem with the “A”

I’m going to use weight loss, because it’s an example many people can relate to. If I want to lose weight I can set a SMART Goal that states something like this:

I will lose 5 pounds in the next 8-weeks.

This statement fulfills all the requirements of the SMART system:

S – Specific = area for improvement = lose weight
M – Measurable = quantity or progress indicator = 5 pounds
A – Assignable = who will be accountable = me!
R – Realistic = reality check on whether the goal is achievable = definitely achievable
T – Timely = when results will be achieved = 8-weeks

Do you see the problem? Nothing changes by simply stating that I’m going to lose 5 pounds in 8-weeks. Wishful thinking will not make this goal happen. Even if you change to the more modern “A” words. The goal is achievable and attainable, but it’s still missing something.

We need some movement or change in order to reach our goals. We need to do something different than what we’ve been doing. Otherwise everything stays the same. The evolution of SMART Goals acronym that needs to happen next, is the “A” needs to become Action. What is the Action that is going to lead to the outcomes we want?

In the example above, adding action makes all the difference. And the more specific, the better:

I will lose 5 pounds in the next 8-weeks, by riding the exercise bike 4 days a week for 30-minutes, and eliminating late-night snacking.

This is a goal that I can hold myself accountable to! I am crystal clear on the behaviors I will be changing in order to reach my goal. As far as the words we are sacrificing, Achievable and Attainable are both addressed when we consider whether or not the goal is Realistic. This new structure gives people the power to create goals that will take them where they want to go.

As you pull out your sweaters and sip on your pumpkin spice treat, consider what a great time this is to refocus on your goals. Hold them up against this new SMART system and make sure they include the Action that will move you forward.

I love helping people clarify, strategize, and achieve their goals. Email me at kim@athena-coco.com to schedule a free 30-minute discovery call if you are interested in setting and reaching your goals!

Kim is a mom, wife, lover of being active and the outdoors,
and helper of small businesses, nonprofits and leaders.
kim@athena-coco.com

Goal Setting Goals Leadership Planning SMART Goals

Strategic Plan vs Operating Plan

Everyone thinks they need a Strategic Plan. And sometimes they do. But not always. Often what an organization really needs is an Operating Plan to effectively drive their work. This article will share when a Strategic Plan is appropriate, when an Operating Plan is a better option, and what a solid Operating Plan looks like. Let’s dig in.

Strategic Planning

Strategic planning is an organization’s process of defining its overriding direction for achieving its mission or purpose. A business uses this process to make decisions on how it will allocate its resources to pursue their strategies.

The general outcome of a strategic planning process is a Strategic Plan. This can be anything from a one-page visual to a binder full of documents, information, and goals. The trap many businesses fall into is believing that the point of strategic planning is to get to the Strategic Plan. In reality, the most important part of the process is engaging stakeholders, volunteers, constituents and staff in the activity of examining the organization.

Gathering information and input from multiple sources ensures a business or organization is staying relevant and on track for fulfilling its purpose. Through this process leaders learn what is important to the community, their customers, and those people closest to the products or services of the business. In order for a strategic planning session to be effective, leaders must be open to change and willing to let go of the past. Otherwise, there is no reason to go through the work of strategic planning.

Another pitfall of strategic planning is to create a beautiful plan, then leave it sitting on a shelf or in a drawer. Again, if you are going to go to all the work of strategic planning and then you don’t use it to guide the work of your business, you have just wasted a bunch of time and energy. This can also serve to disengage your most loyal allies.

When Not to do a Strategic Plan

While the strategic planning process can be a very valuable tool for guiding your work, there are several reasons NOT to do it.

First and foremost, if done right, the strategic planning process takes a significant amount of time, energy, and money. If you do not have the time, determination, or funds to do it right, you are better off not doing it halfway.
A business that falls under the guidance of a parent organization probably does not need to go through a strategic planning process. Usually the parent organization sets the strategy. In that case, your operation is responsible for figuring out how you will execute those strategies for your service area.
A business that already has effective and relevant strategies in place does not need to go through the process. There’s no right or wrong answer to how often you should go through the strategic planning process. A general rule of thumb is every 3 to 5 years. If you are actively using your strategic plan and reviewing, the need for a new planning process will organically reveal itself.
When a business uses Strategy Screens (you can read more about this concept here), they go through the process of examining their strategies every time they are faced with an opportunity or challenge. Similarly to number 3, by using this system you will know when it’s time to go through a strategic planning process. It won’t be dictated by the cycle of the calendar.
As stated above, if leadership is not ready for the potential to make significant changes, then its probably not a good time to embark on a strategic planning process. This can happen because of egos, protecting turf, and special interests. In these cases, it doesn’t matter how fantastic a plan is, it’s unlikely to result in any real change.
Other reasons for not engaging in strategic planning include a lack of understanding of the purpose, lack of flexibility, lack of ability to follow-up and a lack of engaged stakeholders.

Due to the significant investment it takes to do effective strategic planning, you want to be sure it’s the right option at the right time. If you decide that a strategic planning process isn’t right for you, it doesn’t mean you shouldn’t do some sort of planning. That brings us to the value of Operating Plans.

Operating Plans

Strategic planning focuses on how things have changed for your business over the past few years, what’s changing now and what might change in the future. On the other hand, Operations Planning looks at the way you will conduct business over the next year. If you have a Strategic Plan in place, your Operating Plan should be directly tied to it. For businesses that do not have a Strategic Plan, it might be even more important to develop an Operating Plan.

I recommend some level of Operations Planning every year. The best time to do this is leading up to your budgeting process. A budget is simply a plan for your year, broken down into numbers. In order to put together your numbers plan for the year, you need to know what you will be doing.

Since most people cannot predict the future, the best we can do is make assumptions about what will happen over the coming year. Then we make plans around those assumptions. Based on your expertise in your industry, you may predict growth, stagnation, or the need to add a new product or service. Taking the time to think through what will happen over the next year, you are able to put together realistic plans. Sometimes it’s appropriate to map out multiple plans. If XXX happens we will plan for YYY. If XXX doesn’t happen, we will plan for ZZZ.

The next step in your Operating Plan is to develop the budget. With clear assumptions in place you can create the money story to support those plans. Whether you’re predicting growth, staying the same or changing products or services, you put your numbers in place in order to carry out the plans. This is an oversimplification of the budget process. If done right, that process involves a great deal of research, comparison, and give-and-take. That’s a topic for a whole separate article.

Once you have your budget plan mapped out you can write your goals for the year. Done right, your operating goals for the year will keep you on track to meet your budget. And when tied to your Strategic Plan, they will keep you moving towards your mission or purpose.

In addition to being tied to your Strategic Plan, annual assumptions, and budget, a well constructed Operating Plan will include the following:

Goals for the year – Spell out what you want to achieve over the next year. Define how your operations will be different at the end of the year.
Action steps – Break down the goals into the steps it will take to get you there. Be specific and thorough.
Accountabilities – Assign each step to one person who will be responsible for carrying it out.
Due dates/Checkpoints – Set a due date for each of the action steps. A good practice is to set aside time at the end of each quarter to examine your goals, action steps and accountabilities. By checking in every 90-days you stay on-track and are able to refocus.

As you develop your Operating Plans, you will want to run it by your stakeholders. This serves as a “reality check”. While you don’t want to turn this into a pseudo Strategic Planning process, you also don’t want to do your planning in a vacuum. Check the logic of your assumptions, goals and action plans. Not only will this ensure that your plans are solid, it will also garner confidence from your stakeholders, and make it easier to get budget approval.

I really love the quote by Yogi Berra: “You’ve got to be very careful if you don’t know where you’re going, because you might not get there.” Whether you’re ready for a Strategic Plan, or an Operating Plan makes more sense for you, it’s best to know where you’re going.

Need help with your Strategic Planning, Operational Planning or figuring out which is best for your business? Email me at kim@athena-coco.com to schedule a free 30-minute discovery call to get started creating the best plans for your business!