In last week’s post we discussed whether you’re ready for sales success in 2019, with one of our suggestions being the need to create a well thought through budget.
Knowing your figures inside out and making a plan up front can reap rewards throughout the year. Good budgeting will help you make informed decisions whether that’s responding to new investment opportunities or recognising and reacting to any cash flow issues that might crop up.
We’ve pulled together this step by step guide to get your numbers on track going into the new year.
1. Calculate your costs
First things first, you need to know how much you’re spending. Your costs can be split into fixed overheads and expenses. Your fixed overheads are costs that you routinely pay to keep your business up and running. They tend to be paid annually or monthly and will include things like office rental, electricity and staff costs.
Expenses, on the other hand, are your costs of making a sale. This could be advertising and marketing, or the expenses involved in hosting viewers and driving them around the region.
As a start point look back through bank statements and records from the previous year to make sure you don’t forget to include something important.
2. Set sales and revenue targets
Setting realistic targets in terms of sales will give you a decent start point to assess your liquidity. When compared to your forecasted costs, you’ll see instantly how much profit you expect to make during the new year. You’ll also have a baseline against which you can compare actuals sales figures as they happen, so you know whether you’re on target. Don’t forecast huge figures that you have no chance of reaching. Use last year’s figures as your guide and determine how much growth, if any, you expect to see in the coming year.
When you’re trying to establish growth figures it can be useful to research industry trends to find out more about what the market is expected to do in general. Consult our quarterly market insight data for insider knowledge and advice.
3. Create a cash flow projection
This could be something as simple as a spreadsheet that allows you to plan in a little more detail. Using a column for each month, document your expected outgoings and forecast income across the year. Look for patterns in previous years’ activity to make sure you factor in any traditionally quiet periods or times when interest tends to peak.
You’ll need to check that your spending can be reduced in line with your quieter months and make sure you do everything you can to capitalise on the busier months.
4. Give yourself options
Nobody is expecting you to have all the answers up front. This is an exercise in working out the bits you know and estimating the bits you don’t based on history, research and gut instinct. Allocate budget for things like marketing activities and technology investments throughout the year even if you don’t have specific plans. By having them in your forecast these costs won’t come as a shock but you will be able to make spending decisions based on the actual figures in front of you when the time comes.
5. Plan for any eventuality
Nobody knows what will happen even a few weeks down the line. The housing market could be affected by the political landscape, currency fluctuations and the state of economies around the globe. Instead of worrying about this, put yourself in the best possible position to deal with these challenges as the occur. Make some contingency plans and consider where you would be able to shed costs quickly while minimising the risk to making sales.
With a clear and dynamic picture of your business financials you’ll be able to make informed decisions in a timely manner, so you can keep your agency moving in the right direction.
6. Undertake regular budget reviews
Just because you’ve finished pulling together your 2019 budget doesn’t mean it stops there. Schedule in quarterly reviews to make sure that everything is on track. Compare your recent spend and sales against your targets and think about what they’re showing you.
Regularly reviewing your figures will give you a chance to look at problem areas and make a plan to improve them before it’s too late. Or if the going is good, you’ll have a chance to make it even better.