This month’s Guest Glimmer blog post was written by and in partnership with Hannah of Young Wealth Co.

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As entrepreneurs we’ve all experienced the pendulum swing of “Oh my gosh I can’t believe I made so much money this month!” to the dreaded, “oh no, I didn’t make any sales this month.” So when you’re trying to make a good budget to follow, how do you do that when you don’t know what will really happen?

Maybe you’ve tried the cute budget templates before and they’re all lost in the abyss of your google drive, or maybe you got frustrated that the numbers never lined up correctly for what you actually spent, so you decided that budgeting just isn’t for you. 

I totally get it and know that you’re not alone, but I want to encourage you to approach your budget from a different perspective. 

So, How Do You Start Budgeting as a Business Owner?

Think of budgeting like going to the gym. If you go once, it’s not really going to make a difference. Even if you go for 3 months you might see some improvement, but the best improvement only comes once you have a habit of consistently showing up. Additionally, you can go to the gym all day long, but if you don’t know how to use any of the equipment, you’re still not going to get the results you really want.

The same goes for budgeting, you only get the best results when it becomes a habit, a regular piece of your monthly routine. Even if you check your bank app regularly, if you don’t have a solid understanding of finances and how to look at numbers, know they are accurate, and make an informed decision; you don’t know how to use the “equipment” of budgeting and so you’re still not going to get the results you’re looking for.

With all that said, here’s my 3 favorite tips to help you create a habit of budgeting as a business owner, successfully. With these tips, you can survive the whiplash entrepreneurship brings, enjoy your business and finances a little more, and stress a little less.

1. Find Your Averages

Finding your average spend and revenue is one of the first things we do when we start with a new client. It’s way easier to plan for the unknown when we at least have a baseline of what generally happens on a month to month basis. Even as income can vary, a lot of our expenses are going to be pretty consistent. This baseline can help us find out if we’re usually doing pretty well, just scraping by, or quickly running out of cash. 

The easiest way to do this is to take your records from the past year and divide each total by 12 to get the average. This is now your baseline to plan your new budget around. (Feel free to make minor adjustments to your monthly “average” if you have very specific peak and slow seasons).

This also gets us away from guessing on our budget, when we pull from the averages of what actually happened, we’re going to be working with better information.

2. Figure Out Your Priorities as You Navigate Budgeting as a Business Owner

Now that we have our averages we know what kind of situation we’re in (generally speaking), and we can make a more informed decision on how to prioritize where we want our finances to go for this new year. 

A few examples: 

If your expenses are too high, you might not be able to pay yourself enough each month so cutting costs or increasing income is the first priority.

If you’re doing better than you thought, your first priority might be to create an automatic monthly savings transfer so you’re not wondering why your money keeps disappearing and your savings isn’t growing. 

I always recommend building up your savings as a priority because having buffer money makes the ups and downs of entrepreneurship way less stressful.

However, if you have a more serious cashflow problem, that should take priority in being corrected first. Building savings is important, but we can’t build savings with money we don’t have. Sometimes you may need to focus on increasing your revenue or getting some debt paid off before savings can become the real priority.

You’ll find your answers in the numbers from what happened last year when you look at your averages and your current bank balances. You can then determine your most pressing need from those numbers, then build your budget and fill in your priorities from there.

3. Be Flexible and Look at Your Numbers Often

The reality of a budget is that it’s just a guideline, a helpful tool. It’s not a set in stone “this must happen or I’m toast.” By regularly checking your numbers you’ll stay on top of what’s working and not working. Instead of “idk what I can and can’t do,” you’ll see how much you’re saving (or not saving), and be able to make informed decisions from there. 

Examples: Cancel expenses as soon as you know you’re not using them anymore, know if you can pay yourself a bonus from a big sales month, know if you’re going to have a problem covering all of your bills, max out your roth, or maybe go on that trip you really wanted to book, etc. 

Your budget should be adapting with you as your business and priorities shift and change too. 

The goal isn’t perfection, it’s consistency and awareness. 

Budgeting as a Business Owner Isn’t as Scary and Overwhelming As it Sounds

Just like you might not actually go to the gym to stay in shape, (you could run, do pilates, have weights at home, etc.) and still get great results by doing what works best for you.  The same goes for your budget, you’ll have the most success when you choose the option that best fits your personality and preferences. So check in often, look for the trends year over year, know your own strengths and weaknesses, how you can protect yourself, and don’t panic when you go over budget. Let it be an informative tool to help you readjust for the next month. And then repeat the cycle again the next month.

All in all, you don’t need to be perfect with your money, but the more you practice budgeting and paying attention to your finances, the easier it becomes to keep up with because you get better and better at it.  And it’s way easier to make better decisions for your business when you actually know what’s happening every month. You’ll be able to spot the problems, make adjustments, and see real progress that will have a huge impact on the long term success of your business.

If you need help you can check out youngwealth.co for more resources.