Stop Wondering Where Your Money Went: Budget Your Way to Success

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Ever wondered why so many small businesses fail within their first few years? The answer might be simpler than you think. In this eye-opening episode of Light Up Your Business, I dive into one of the most crucial yet overlooked aspects of running a successful business: creating and maintaining a proper budget.

The statistics are sobering – while 67.7% of small businesses survive their first two years, fewer than half make it past the five-year mark. The culprit? Poor financial planning and cashflow management. Drawing inspiration from Dave Ramsey's Entreleadership principles, I break down the essentials of business budgeting in a straightforward, practical way that even financial novices can understand and implement.

I share a seven-step process to create your own business budget, from identifying revenue streams to regular review practices. We explore the critical difference between a profit and loss statement (your financial rearview mirror) and a budget (your forward-looking financial roadmap). Through real examples from my coaching experience, including one client who discovered they were losing money every month because their pricing structure was inadequate, I demonstrate how proper budgeting can literally save your business. As John Maxwell wisely puts it, "A budget is telling your money where to go instead of wondering where it went." This episode provides the tools you need to start directing your business finances with confidence rather than wondering where all the money disappeared to each month.

Ready to transform your business finances? Subscribe to Light Up Your Business for more practical business insights, and email me at [e-mail] with your questions or to share how you manage your business budget. Remember, in the world of small business, understanding your numbers isn't just good practice—it's essential for survival.

Say goodbye to overwhelm and self-doubt, and hello to confidence and success. Join the Faith Filled Coaching family today and step into the abundant future you've always envisioned.
Visit FaithFilledCoach.com to schedule your free 30-minute consultation. Let's make your business dreams a reality, together.

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Episode Transcript

Tammy Hershberger (00:01):
Welcome to the Light Up your Business
podcast, the show where we divedeep into the world of small
businesses.
I'm your host, tammyHershberger, and each episode
will bring you inspiring stories, expert insights and practical
tips to help your small businessthrive.
Whether you're an entrepreneurjust starting out or a seasoned
business owner, this podcast isyour go-to source for success in

(00:21):
the small business world.
Let's get started to source forsuccess in the small business
world.
Let's get started.
Hi everyone, I am back foranother episode of Light Up your
Business podcast.
I am Tammy Hershberger, andtoday we have a subject that's
kind of boring, but it'ssomething that is important for
your business, so we're justgoing to do a short little
podcast here about it.
I want to talk about theessential topic that can make or

(00:44):
break your business, and thatis a business budget.
Now, this is not going to tellyou like this is a sample budget
for you to use.
That's extremely boring.
I just want to go through somebasics for you, just so you kind
of understand what you need tobe doing, because I have dealt
with businesses in my coachingprogram and they do not have a
budget.
They're like I don't know wheremy money's going.
Well, that's not good.
That's not good.
That's not going to help yousurvive in your business.
So we're going to talk aboutwhat a budget is, why it's

(01:06):
crucial for your success, andthen I'll give you a quick kind
of a step-by-step guide tobuilding one that will help your
business thrive.
I wanted to say that I got thisepisode idea from an article
from Entree Leadership, daveRamsey.
It's called how to Create aBasic Business Budget.
So if you go on his website, hedoes a lot of detail in there.
I'm just going to hit thepoints here, so let's go ahead

(01:28):
and get started.
So why do businesses failwithout a budget?
Well, there is two main reasonswhy businesses fail.
They have poor financialplanning and bad accounting.
Now, that's one thing.
Not everybody has an accountantand if you can, great, you
should at least have abookkeeper that's handling a lot
of that stuff for you, becauseyou should be in the field
selling and ordering product andinventory and handling your

(01:50):
employees and all that stuff.
And so that is.
You know, I've done that forbusinesses on the side because
they I'm good at it, it's quick,it's easy, it's not that
expensive usually to hire out,and that way you can quickly see
where is your money going?
How much profit am I making?
You know all that kind of stuff, so we'll get into that.
There is a study, let's see.
That said, for small businessesbetween 1994 and 2020, 67.7%

(02:18):
survived at least two years, butfewer than half of that made it
past five years.
So most businesses are notstaying in business, right.
Fewer than half of that made itpast five years.
So most businesses are not.
They're not staying in business, right?
I always had.
When I took accounting class incollege, the teacher always told
me that a good accountant isworth their weight in gold,
because making sure your stuff'sbeing assigned to the right
place, making sure you have themoney that you need to run your
business.

(02:38):
Obviously, taxes are a wholenother mess that I'm not going
to talk about.
But you may be saying, well,why is that?
Why is Pete?
Why are businesses not makingit?
Well, the common culprit is thecashflow.
I mean, if you have no money,your business is done Like.
I don't care how great ofemployees you have, how much
inventory you have, how greatyour building, how great your
location is, if you cannot keepcashflow, your business will not

(02:59):
survive.
Many businesses don't planstrategically for their finances
, leading to unexpectedshortfalls and financial
roadblocks.
So if you want to set up yourbusiness for long-term success,
you must have a solid grasp onthe money that's coming in and
out of your company.
So what's a business budget?
A business budget is afinancial roadmap that basically
outlines how you'll spend yourmoney.

(03:20):
Where is your revenue going togo over certain periods of time
monthly, quarterly or yearlymoney?
Where is your revenue going togo over certain periods of time
monthly, quarterly or yearly?
Leadership expert John Maxwellsays a budget is telling your
money where to go instead ofwondering where it went right.
Too much month left at the endof your money.
That's a real problem for mostpeople.
You should even have a personalbudget.
I mean, I personally budget mymoney as well.
That way, I know how much isfor God, how much is going into

(03:42):
savings, how much is going tobills, how much is spending
money it's important to see.
A business budget is not thesame as profit and loss.
So if you don't even know whata profit and loss is, we can get
into that some more.
A profit and loss statement islike a rearview mirror it tells
you what already had happened.
So when you look at it.
It's got your profits at thetop, your liabilities, your

(04:02):
expenses, and then the bottomnumber is how much money your
business has left For what?
For future investment, for moreemployees, for advertising,
whatever right?
Where a budget is lookingforward.
It's helping you set financialgoals, to create a plan to
achieve profitability.
So why you need that is becausea budget is more than just
numbers on a spreadsheet.
It's the lifeline of yourbusiness.

(04:24):
So let's talk about why it'sessential.
One, maximizing your financialresources.
You've got to ensure everydollar is used effectively.
Two, manages cash floweffectively.
Helps you avoid running out ofmoney.
You don't want to start aproject and not have the money
to finish it.
You don't want to take a bunchof for me shed orders and then
not be able to have the money tobuy the materials to build the
shed.
That's a problem.

(04:45):
Three, encourages spendingdiscipline.
Ensures you don't spend morethan you earn.
Four, keeps you on track of taxpayments and financial
obligations.
It prevents costly surprises,let me tell you.
And lastly, helps you ensuresuccess and adapt.
Allows you to track progressand make informed financial
decisions.
So, how to create a budget?
If you've never created abudget, don't worry, we're going

(05:09):
to get through this, youbasically just need to follow
these five or seven steps.
I'm sorry, seven steps.
One you want to find out howmuch money do you have coming in
.
What is your revenue streams,right?
List all the ways your businesscreates income.
Break it down into individualrevenue streams so you can see
where your money is coming from.
So, for example, you may wellI'll just use my window cleaning

(05:30):
business that I had.
So we had revenue stream comingin from gutter cleaning.
We had revenue streams comingin from power washing.
We had revenue streams comingin from window cleaning.
Gutter cleaning had the bestprofit margins, right, but we
typically did more windowcleaning.
So then I could kind of seewhere is that.
Now you may have other revenuestreams in your business, but
list them all out.
So where is all the moneycoming from?

(05:52):
Then determine your cost ofgoods sold, which is cogs people
call it.
So if you sell products, yourcogs cost of goods sold include
everything you spend oninventory materials production.
This helps determine how muchit costs to produce what you
sold or are selling.
Then you want to list all yourbusiness expenses.
Expenses are rent, utilities,software, subscriptions,

(06:13):
marketing, payroll, anythingelse that's necessary to run
your business.
Then you want to kind ofcategorize them into fixed costs
rent and salaries.
Those are things that are notgoing to change every month.
And then you have your variablecosts marketing supplies,
materials right, that stuff'salways fluctuating.
Break that down.
Then you want to do estimatedincome and expenses.

(06:34):
So if your business is new,make an educated guess based on
the industry that you'veresearched.
If you have historical datalike I've been in business nine
and a half years, nine years wehave consistent I can look at
the last 10 years, nine yearsand see consistently, yes,
things are increasing every yearbut I can get a pretty good
gauge of what it's going to costme.
And then so you want to getthat kind of figured out for

(06:57):
realistic estimates.
And some people call that arolling budget, where you'll put
the whole year on onespreadsheet, from January to
December, and you'll kind ofestimate how much rent's going
to cost and how much utilitiesare going to cost and how much
inventory I may need and howmuch payroll cost is going to be
, how much insurance.
And then you, as the month goes, you put real numbers in there

(07:17):
to start to refluctuate that.
Calculate your projected profitor loss.
Use this formula.
So revenue minus expenses,minus cost of goods equals your
profit or your loss.
Hopefully you're profiting.
A loss means you're in the hole.
It'll help you to see if yourbusiness is on track to make a
profit or if you need to.
You know, raise prices, cutexpenses, all that kind of stuff

(07:38):
.
You can't be in business losingmoney.
It's not going to work.
Then you want to review thatbudget regularly, check your
budget at least once a week toensure you're staying on track.
So then you want to askyourself are you meeting your
revenue goals?
Is my sales team selling whatthey need to sell?
Do we need to adjust spending?
Are we spending too much moneyon something?
Is there things we can cut?

(07:59):
Is there things we can cut backon?
You know, insurance is a goodexample.
Every year I get a new quote.
I check around because if it'sgoing to be a lot cheaper
somewhere else and it's the sameproduct or better, I'm going to
switch and then review monthlyby comparing your budget numbers
to your actual income andexpenses to see, because
sometimes you estimate and thenthe numbers way off the chart
and you have to figure out whatjust happened.
Sometimes you estimate too high.

(08:19):
That's great More money leftthan you thought and then work
towards a long-term budget.
Once you've successfully manageda one-month budget, start
planning for the next few months, gradually expand to 12 to
18-month budget that's kind ofthe rolling budget to create a
clear financial roadmap.
Adjust and refine your budgetas you gain a deeper
understanding of your businessfinances.
So remember, creating abusiness budget isn't just a

(08:45):
good idea, it's necessary foryour success.
I am telling you, and it'seye-opening I work with one
client and they didn't have abudget.
We did a budget and theyrealized they're losing money
every single month.
So then we went really detailedand got into their product
they're offering and we realizedthe product they're offering
they're not charging enough.
So then we had to start raisingprices to get them out of the
hole, because they couldn'tfigure out why the money was all

(09:05):
gone.
You really got.
You live and die by yournumbers, people.
You've got to dig into yournumbers.
When you understand yourfinances, you gain the power to
have strategic ability to makethose decisions and drive your
business forward.
It all comes down to numbers.
The better you manage them, thebetter your chance of success.
So if you found this episodehelpful, please share, like and

(09:27):
subscribe to Light Up yourBusiness podcast.
Again, we're on YouTube nowwith video, as you're seeing.
Join the conversation.
Let us know how do you manageyour business budget.
Send me an email.
Let me know if you have ideasfor future episodes.
If you want to come on thepodcast, if you live in Junction
or Colorado and you can gethere, come in the studio, we'll
have you live.
If you can't, we can do a phoneinterview with you.

(09:47):
We'd love to come.
Bring you on talk about yourbusiness.
You can email me atlightupyourbusinessllc at
gmailcom.
Thank you for listening and wewill see you next time.
And remember, in the world ofbusiness, every success story
begins with a passionate dreamand ends with a strategic
billion-dollar handshake.
Stay ambitious, stay innovativeand keep making those deals

(10:11):
that reshape tomorrow.
Thank you all for tuning in anduntil next time, remember.
Proverbs 3, 3 says let love andfaithfulness never leave you.
Bind them around your neck,write them on the tablet of your
heart.
That way you will win favor anda good name in the sight of God
and man.
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