CEO Message – February

I hope you have been enjoying the ‘Business Start-Up’ theme of our latest newsletters. From analysing small businesses in Australia and writing a business plan, to setting SMART goals for the year ahead, we hope we have provided some insightful tips to launch your business endeavours.

To wrap up our business series, I’d like to highlight the budgeting and forecasting side of running a business.

Budgeting and forecasting form integral parts of the business planning process and can take a while to plan – but that’s ok!

To succeed in the long-term, you need great planning at the start, so by forecasting revenues and estimating cost, you can create a budget that keeps you accountable and on the right track to success.

Forecasting revenues

By understanding the structure of your industry’s revenue patterns like seasonal considerations (e.g., cafes profiting in the December period but then slowing down at the start of the New Year), you can begin to forecast your expected revenues.

It is useful to break up your forecasted revenues into measurable chunks (e.g. weekly, monthly), to ensure your revenue goals are attainable and to reflect on your revenue periodically.

Estimating costs

Before starting your business, you will need to consider both variable and fixed costs, but please be aware that you don’t have to be too specific!

Variable costs can be calculated by recognising your activities that can generate income, identifying what resources you will need to deliver those activities, then finally, how much the resources cost.

Fixed costs are considered by calculating certain costs that will always be there, like, staff, rent etc.

But how do you create a budget and forecast for events that haven’t even happened yet?

I found the following two (2) points essential when I was in the preliminary stages of running my own business:

1. Research, research, and more research!

   Doing your research is essential before making any big plans for your business. Research your specific industry, seek advice from our financial professionals, or even ask others in your industry about their experience. Having a strong base knowledge of what to expect will better prepare you during your budgeting and forecasting stage.

2. Measure & modify

   if the pandemic has taught us anything, it is how difficult it can be to predict everything that will happen in the future. Therefore, creating a solid budget plan that keeps you accountable is essential for navigating through gruelling times. However, your budget is not set in stone. It is a tool that can be modified or changed regularly. As your business progresses, it is useful to compare your actual performance with your budget and make amendments that better suit your circumstances.

Forecasting and budgeting are certainly not the most exciting nor easiest elements of your business plan, but they are essential to the long-term success of your business.

In fact, to see some perspective on the need for long-term planning, I’d like to draw some statistics from the Australian Bureau of statistics. The Australian small Business and Family Enterprise report from 2019 (a pre-COVID world where we weren’t living in extreme circumstances), found that small businesses employing between 0-19 people have a 59.7% success rate.

But what was the reason for nearly 40% of small businesses failing to stay afloat?

The University of Technology Sydney found that the largest contribution was financial mismanagement. This encompasses factors like cashflow issues and lack of budget framework.

But don’t let these figures deter your entrepreneurial spirit, rather use them to remind yourself of the importance of having a thorough business plan with a rigid budgeting and forecasting framework

Should you require assistance in planning your business or simply want to have a chat about our services at WSC Group, please get in touch on 1300 365 125 or email info@wscgroup.com.au.

Visit our Business Start-Up Series for further tips in successfully launching your business.

"Someone is sitting in the shade today because someone planted a tree a long time ago"

-Warren Buffett