(Last Updated On: April 19, 2019)



Image showing business people who are making a budget


Make a budget!


This advice is often given to Small Business Owners, Entrepreneurs and self-employed persons.


Good advice actually…but I have a big problem with the advice that follows, on how to develop that budget.


So, when some of my clients learn that I was an Accountant in an earlier life, and ask me: Can you help me make a budget, Lorna? A meaningful budget?  


I usually say to them: I can…in a heartbeat. The question is: Do you have the guts to implement it?


That question should be a clue to the fact that my approach to budgeting is “somewhat” removed from what I learnt in business studies and what I had to submit to Non-profit boards over and over again.


You see, I believe that when you set out to make a budget, it must give reality to the life you dreamed of, when you started your business.


The advice you’re usually given will not make this happen for you.


So, do you want some budgeting advice that’s guaranteed to get you the results you want?


Do you want a budgeting approach that truly aligns with your entrepreneurial spirit?


One that works for me and my clients who dare to try it?


If you’re sure…here goes!


Make a budget that suits your lifestyle

Don’t kill yourself  trying to keep your personal life separate from your business when you’re budgeting.


You see, however hard you try, when you are going to make a budget, trying to keep your personal life and your business life separate, does not work.


I don’t know if it’s even desirable.


Look, you cannot grow or scale your business without growing yourself. Those of you who took part in  My Rapid Scale Leadership Programme actually learnt how to do this. 


When you are self-employed or run a small business, the distinction between you and your business is somewhat blurred.


Furthermore, it is not as easy as Accountants lead you to believe and trying to keep them separated in all cases leads to confusion and frustration on your part.


So you want to begin the process by making a budget that suits how you live and work. 


Develop the expenditure side of your budget first

Decide on a length of time that you want your budget to cover. A year, 18 months, two years?  It’s up to you but for a number of reasons I find that a one-year budgeting period works best. 


Then decide on what you want to spend money on.


This is where I believe that a budget for an entrepreneur or Small Business Owner (SBO) must part company with regular budgeting items.


Here are some of the items you want to cover in your budget:


1.  Your goals and dreams

These are made up of what you would love to achieve (dreams) and specific things you have set yourself to achieve in the budget period (goals).


These should both be for the business and yourself. If you have to sacrifice any one of them, make it the dreams. This is to prevent you from having too many nightmares.


2.  New business ventures

As a business person, your brain should always be ticking over with new business ideas.


There is no better place for these to show up than in your budget. This is a clear demonstration of your seriousness and commitment to growing and scaling your business.


Evaluate your ideas and when you make a budget, set aside money for the one(s) you believe you can bring to reality the fastest.


Just remember that depending on the nature of your idea, it can take up to five budget periods before you have enough money to start working on it. But if you don’t put it in the budget, you may never start.


3.  Savings is a must in your budget

I treat saving like an expense. 


God knows the licks I have taken for this approach! I am emphatically reminded that this does not make good accounting or economic sense.


I just shrug my shoulders or shake my head. Disrupting the status quo is what we often need to do to make a difference in our lives and in the world.


If you don’t treat saving  like an expense, you do not develop the habit of saving and it is savings that help you to live through those time when money isn’t coming as fast as you would like.


4.  Philanthropic activities

There is actually a cost to all those free sessions you give away.  As well as the donations to your favourite charities and those events you sponsor.


And you should budget for them.


Decide on an amount that you can comfortably give away and put it in your budget. If you leave this part of your life and work out of your budget, you might give away more than you make. Oh Yes!


Furthermore, when you place your generosity in your budget, you don’t have to feel bad about saying “no” to another charity request. Instead, you can say “I have already exceeded my philanthropic budget for this year…”


How cool is that?


5.  Your Personal Development

Yes, this must go into your budget too.


How are you going to grow your business if you don’t plan for and grow yourself?


Not being specific and budgeting for personal development is a weakness that is all too common among Caribbean SBOs and entrepreneurs.


6.  Health and Wellness

When you are self-employed, it is very important to look after yourself because your business suffers if you are not well. And the approach that “prevention is better than cure” must be your guide.


You must also include an amount to cover any members of your family whose health and wellness you help out with as well.


7.  Lick-out money is a must for your budget

Aahhh! I love putting this in my budget!


In my country, when we talk of “lick-out money” we are referring to money which you spend on non-essentials. This is a must for your budget.


By actually budgeting money to treat yourself, to buy little fancy things for your office, to just “lick out” you remove the guilt you feel when you treat yourself.


In addition, having “lick out” money in your budget gives you a serious measure of control, if you stick to the budget.


It also reminds you that treating yourself does not prevent you from getting rich.


8.  Put money in your budget for your salary 

I believe in paying yourself a salary. It is from this that you finance those personal expenses you cannot charge to the business.


Don’t make this too large to bankrupt your business or attract a high tax rate. Also remember that many of your expenses can be legitimately charged to the business.  (Once an Accountant…)


9.  Don’t forget those regular expenses

You know…the stationery, the utilities, the rent, the mortgage etc. And don’t forget those annual expenses like car insurance, etc.


Now work on the income side of your budget

Now that you have identified your expenses, it follows that budgeting for income should be pretty simple.


You just have to add up all your expenditure items and go out there and make the money to cover them, right?


Well, yes…but no...


1.  How to determine your income projections

The first thing you must embrace, if your budgeting is to be authentic, is that your income projections cannot be  determined only by the amount of money you allocated to the expenditure items.


Remember you are in business to make a profit. So, the amount of income you want to earn must also include your expected profit. Yeah…you’re in business to make a profit, remember?


There are two ways you can include profit in your budget.


One, you can determine how much profit you want to make and include it as an “expenditure” item, much like savings.


Or two, you can use it as a motivator.


In this approach, you select the items that are likely to add the most value and or growth to the business. These are those items such as goals and dreams, personal development, new business ventures.


Then you allocate the required profit among these items only. In this way you are motivated to put more effort into achieving those things that grow your business and improve yourself.


2.  Decide how you will earn the income

How you earn the income specified in your budget is up to you and how you leverage and combine your unique personal and business strengths.


For example, having identified my goals for the budget period, I decide which combination of the four best ways to grow a business (info for another post) I will be leveraging to help me reach my income goals.


3.  Implement

Yes! you have to implement your budget.


It only works if you implement it, however good it looks on the paper


Your next step to making a budget

So there you have it…a great budgeting model for SBOs, self-employed persons and entrepreneurs.


You will find that it turns the popular nickel-and-dime-don’t-spend-more-than-you-earn approach right on its head.


It requires you to be aggressive in looking for money-making opportunities – something that too many entrepreneurs and self-employed people find hard to do.


It’s also very liberating and spiritual because you’re not constricted by the economy, the amount you made last year, what the “gurus” are making or even the average earning rate for your industry.


Begin by keeping it simple and as you see how it works and how you can make it work for you, you can become a little more creative.


So go on, give it a try…wont you? and be sure to let me know how it works for you!

How to make a budget guaranteed to get the results you want!

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