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I know, you just finished your taxes, that was enough numbers for a while. The last thing you want to talk about is your budget.

However, with changes on the horizon in the economy, it is something you should work on now!

Why Budgeting is Important to You

The truth is that there is nothing new, trendy, or sexy about budgeting. A well-planned budget is simply the most practical aspect of your business plan—and one of the most important. It’s also not that much fun, well, unless you love numbers, like I do.

If you have completed your taxes and the other parts of your business planning guide, you’ve done the hard part already.

You’ve analyzed where you spent your money last year and how well it returned your investment. You have articulated the vision for your business in the next year. You’ve written down the action steps to achieve that goal.

Now it’s just a matter of the numbers.

The easiest way to tackle this job is with a good software program, like QuickBooks, but you can also manage the old-fashioned way, by hand on a chart or Excel Document, if that’s what it takes to get you started.

Your budget records your total income, gross and net. It includes the numbers for your current expenses, plus those you anticipate adding under your new vision. It breaks down the expenses and itemizes them so that nothing is overlooked, creating a potential drain on your cash flow down the line. And remember, positive cash flow is the goal.

When the numbers are complete, if you don’t like the result, you need to remember to reevaluate the plan. If your marketing exceeds your income, for example, then you must make a decision: slash the marketing budget or make more money. Either way, your budget needs to “show you the money.”

Approach to Budgeting

Approach #1: Gary Keller reminds us to “lead with revenue” when budgeting. He cautions only to spend the money that the business has generated and avoid the “Field of Dreams” mentality of expecting business to materialize if you spend enough money on marketing, staff, quality equipment, etc.

Approach #2: Write down the number of marketing dollars you will need for the next year to reach your goal then do the math. How many listings will you need to carry in order to create that cash flow? How many will you need to sell? Or, how many buyer sides? Those are your numbers to live by.

Truth be told, a combination of these approaches is probably the wisest course, but regardless, the budget is the budget and you stick to it. (That’s the unsexy part.)

But don’t worry about that because this can serve you well when some annoying vendor tries to convince you that you really must buy his refrigerator magnets by the thousands with your logo embossed on them in order to be a success at the next home show.

You now have your ready-made excuse: “oh, we set our marketing budget for the year..”

The budget might not seem to be your best friend at times, but it should be your wisest adviser—the one you trust with your most important decisions.

Accordingly, spend enough time with it to do it, and yourself, justice. Your business, and your profit/loss statement, will thank you.

Budgeting and Coaching

My coaching clients have the benefit of using me as their excuse whenever a real estate marketing salesperson contacts them wanting to make a sale.

My clients are instructed to tell them to send them the information so that they review it with their coach and see if it makes sense in their budget.

If you are looking for an out with some of these pushy sales people, maybe coaching is right for you!?

Either way, happy budgeting!

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