You know that I am a huge fan of budgeting, both in our personal lives and in our businesses, but we need to talk about the disadvantages of budgets.
Particularly one really big disadvantage that I’ve seen in myself, I’ve seen in my clients, and I don’t want you to not see it in your own experience. Because this is a big one and it’s going to make a huge difference to your bottom line.
Watch here or read on below.The #1 Disadvantage of Budgets for a Small Business Owner Click To Tweet
Before I get into the disadvantages of budgets, let’s just talk about a few advantages that people often forget.
- No more spending for write-offs
You’re not going to be spending just to have a write-off. I see this so often people are like, oh, but it’s a write-off so it’s okay. As though that means that the government’s going to give a hundred percent of it back to you. That’s not what that means. It doesn’t mean you get to buy things for free. It just means you get to write them off. This isn’t a tax video. I won’t go into that. But what a budget does is make sure that you spend money based on how much money you have to spend. And not because you just can spend it, because you want to spend it, because it’s a write-off, because it doesn’t matter, because you’re not aware of it. You’re not thinking about the numbers. This just makes sure that you can actually make more profit.
- Pay yourself first
Advantage number two is all about profit. Paying yourself first. This allows you to actually see a profit. It’s so common in businesses to be making six or multi-six, seven figures and be personally broke because their expenses are matching their revenue. When you learn how to budget using something like the Profit First Method, this really allows you to prioritize profit, teaches you how to do so within your budget so that you make sure you can have a good, comfortable lifestyle and all your money isn’t just constantly going out.
- Ability to invest in growth
The other big advantage of a budget is that you have the ability now to invest in growth because you know where your money is coming and going, because you have a handle on it and it’s not just flying out the window before you’ve even had a chance to see it, you now have the ability to invest it in really smart ways. This means you’re not just increasing your profit like we were talking about before, but now you’re able to increase your revenue because you know where to put your money.
So let’s talk about those disadvantages. If you Google the disadvantages of budgets, most of the answers are going to find are things that are easy to overcome. It’s really just about the skill, right? It takes a long time to set up. It’s tough to stick to. All of those things just come through practice with using your budget.
Yes, they are a disadvantage at first, but once you master them, the advantages far outweigh that.
However, there is one big disadvantage of budgets specifically for business owners, but even not for business owners, for anybody who wants to make more money:
A budget is not going to help you make more money.
A budget’s going to help you manage the money you’ve already made.
This makes a very big disadvantage of budgets, putting your focus on the wrong thing.
One of the things we do when we have a budget is we go through and we figure out where are we overspending? How can I save a little bit more money? What can I audit in my tech to be able to eliminate five pieces of tech down to two pieces of tech also that we can streamline our expenses and increase our profit? That’s a great thing. That’s why I want you to have a budget.
However, you’re going to get to a point where you can only cut your expenses so much, or you’re going to be spending so much time trying to cut your expenses that you hurt your business.
I want you to be focused less on how to save a hundred dollars and more on how to earn a hundred dollars.
A hundred dollars, $350, $500, $10,000. That should be your primary focus. Yes, we need to get our expenses in order, but we need to make sure that it’s not robbing us of what our business is really about. It’s got to bring in revenue, it’s got to turn a profit. It doesn’t have to save money, save money, save money, save money.
At some point, you need to stop trying to save money and you need to put all of your time and attention into earning money. It should be easier for you to earn a hundred dollars than to save a hundred dollars.
So why are you spending time focusing so much on savings versus focusing so much on the things that increase your revenue?
So what is the solution to this? Especially because I still think that you need to have a business budget. I still have two videos on how to budget for your business. (You can watch those here and here)
What do you do to make sure that your budget is staying an advantage and not turning into a disadvantage?
- Set up the budget and help it to train you to stop overspending on things that your business doesn’t need.
- This means creating your budget based on what your business actually needs and not just the overall amount that you’re spending. You want to make sure that your spending is smart and is meeting your business’s needs and is making it easier for you to operate your business so that you can go out and create more of it.
- You want to make sure that your business revenue, that your expenses are making smart moves, not cheap moves, right? Your business needs to be smart. It needs to be streamlined, but it doesn’t need to be stingy.
- And then once you have your budget created based around your business needs, take your focus off how much you’re spending and put it entirely on how much you’re earning. Your job is to outearn your budget, hopefully by leaps and bounds.
If this is something you’re struggling with in your business, I encourage you to check out my Healthy Hustle Roadmap. My free class, How to Use a Holistic Approach to Create a Profitable Business Without Burning Yourself Out will teach you the three mistakes small business owners are making, as well as the strategies that I use to help you create a profitable, reliable business in under 40 hours a week. You can grab your seat for the free class by clicking the button below.
What about you, boss lady?
I’d love to hear from you! Do you have a business budget?