No Business is too small for a proper Budget

Many business owners mistakenly think their operation is too small for a formal budgeting process. The budget (of sorts) that many business owners keep inside their heads is often more like a basic recipe, and is usually inadequate to deal with the constant change that every business is subject to.
 
This is according to Gerrie van Biljon, executive director of Business Partners Limited, who says that no business is too small for the discipline of hammering out a formal budget – which needs to be used daily in the management of a business.

He says proper and thorough budgeting is beneficial to a business as it clearly impacts on its long-term growth prospects. “Business owners who compile and use formal budgets know well in advance when cash will run out and can plan for it. They can also plan properly for business expansion and their financial decisions are often based on carefully thought through facts and figures. In short, budgeting gives them financial control over their businesses.”

Van Biljon says a business owner must ideally budget at least once a year for the 12 months ahead, but in order for the exercise to be in any way meaningful, the process must meet a few crucial requirements:

• The business owner must be involved in setting up the budget. This exercise provokes thought (on the part of the business owner) and it assists in planning once he/ she sees the detail. One shouldn’t be leaving a budget up to a bookkeeper or accountant.
• An annual budget that is drawn up only to be kept in the bottom drawer means nothing. The value of a budget comes to the fore only when a business owner constantly reviews it, consults it, adapts it and compares the forecast figures with the actual figures – at least once a month, in order to identify material variances.
• A budget based on actual figures from previous cycles is a good platform to start with. A budget for any business should include at least a sales forecast, a cash flow forecast, and income and expenditure forecast, a capital expenditure forecast and a balance sheet forecast, says van Biljon.

He explains that of these, the most important working document for any entrepreneur is the cash flow forecast. “Without a cash flow forecast, a business is at a high risk of running out of cash at some point.

“Many of the common mistakes that business owners make in budgeting has to do with the cash flow forecast. It is very important that the cash budget takes into account the realities of the business’s debtor and creditor cycles. Business owners must take into account the cash lag from the date of having to pay suppliers to the date on which payments are received from customers.”

Van Biljon adds that often business owners neglect to work taxes such as PAYE, VAT and provisional tax payments into their cash flow forecasts.

Another crucial part of budgeting is the sales forecast, which needs to be as accurate as possible, says van Biljon. “One of the greatest strengths of entrepreneurs – their optimism and can-do attitude – can also be a limitation if sales predictions are set too high. Realistic yet challenging sales forecasts should be set.”

He warns that despite its obvious benefits, budgeting is still often neglected by business owners, due to factors such as sudden spikes in sales and increased cash flow, or absolute focus on day-to-day operations. “It is very easy to drop your guard and take your eye off finances and business owners need to guard against these bad habits.”

Van Biljon advises such entrepreneurs to rope in support from an advisor or reputable accountant who could help with drawing up a budget. “The mere step of making an appointment with an accountant helps to enforce the discipline of preparing for the meeting, and taking a step back from the operations to reflect on the finances.”

He says business owners who struggle with budgeting often find that, once they grasp the basic principles, and become comfortable with using spread sheets, compiling and reviewing budgets do not take much effort. “It is not a complex, nor daunting exercise. All business owners need to do is seek proper advice and support, and then dedicate time to draw up a budget,” concludes van Biljon.

Source: How We Made It in Africa

7 Ways to Talk Less and Get More from Customers.

1. Be distinct from the competition. 

When prospects perceive you as similar to other salespeople, you are in trouble. As a result, your goal is to be perceived as totally distinct from the competition. The next time a prospect asks you why he should do business with you, you should reply, “I’m not sure that you should. Would it be okay if I asked you a few questions to better understand your situation?”

This approach is different, more credible, and immediately separates you from other salespeople. 

2. Understand your prospect’s challenges. 

Most salespeople spend their time trying to persuade prospects rather than taking the time to understand the problem that the prospect is facing. Remember: Prospects are looking to solve certain challenges; they are not looking to be sold. Take the time to learn about their key problems first.

3. Understand their goals. 

When a prospect solves his challenges, he can then achieve his goals. Once you’ve fully understood the prospect’s challenges, it’s time to understand what he’s looking to accomplish. Whether you sell to consumers or businesses, all prospects are looking to accomplish specific goals with your product or service. Understand what those goals are.

4. Develop a workable budget. 

Many salespeople simply quote a price to their prospect without ever having a good conversation about money conversation. This approach is costing you thousands -- maybe even millions -- of dollars in lost sales. From now on, help prospective customers develop a budget to solve their challenges and accomplish their goals. It doesn’t have to be an exact number. A range will do. This will help you determine whether someone is qualified for your service or product before you present your solution.

5. Understand their decision-making process. 

Many entrepreneurs and sales people feel stuck when potential customers tell them they need to "run it by a committee” before committing to anything. In most cases, the salespeople had no idea that a committee was even involved in making the decision. Well, whose fault is that? Salespeople rarely ask what the prospect’s decision making process is -- but they should. Here are two examples of good questions to ask: “Who else is involved in this decision?” and “How do you typically make decisions like this?”

6. Make sure they're committed to their goals. 

Before you get to a presentation of your product or service, you want to be sure that the prospect is committed to solving her challenges and achieving her goals. If they aren't, you're wasting your time by even presenting a solution. Your time will be better spent with other prospects who are committed to solving their challenges and achieving their goals. Before you present your solution, ask, “How committed are you to actually solving these challenges right now?”

7. Keep it short. 

Most salespeople spend most of their sales meetings presenting. That’s why they’re doing all of the talking in the first place. Rather than spending most of your time presenting, spend the majority of your time doing steps one through six. Get to really understand the prospect’s situation and decide whether he's invested in finding a solution. Then give a presentation based on solving his challenges and achieving his goals. Don’t present anything else. The prospect doesn’t care about every single feature and benefit of your product or service. He only cares about accomplishing his goals. So keep it short.

Putting all of these ideas into practice requires that you actually talk less. A great salesperson will talk no more than 20 percent of the time in a selling situation. Close your mouth a little more and you might just find you'll close many more deals as a result.