Forecast and Plan Budget- before opening the doors

Most entrepreneurs detest crunching numbers and creating budgets. Working on an annual budget confines the imagination and limits flexibility. Still, budgets are more important than ever in today’s business environment.

Don't be one to fall into excuses for avoiding budgeting. “Startup cash flow is too unpredictable.” “One big customer order could change the course of the business, so what’s the point in setting a budget?” "I can't predict what will happen next fiscal year until I see what happens this year."

In my experience, it's easy to make an excuse for the right-brain, creative side to take precedence . Entrepreneurs just don’t like left-brain financial planning. So, if you’re running your startup solo, you should force yourself to develop a budget to hold yourself accountable. Here' why:

1. It will help you to become a better manager. When done properly, budgets can be extraordinarily useful in testing and refining your ability to forecast and manage. While boards like to use budgets to hold managers accountable, the startup CEO can use budgeting to test whether the drivers of his business hold true. One straightforward way to do this is to set an annual budget with a set of key assumptions (e.g., number of new clients; product price), then reforecast the year every quarter by updating those assumptions with the latest results.
2. It will help you raise money. When trying to raised money from angel investors or institutional investors, the importance of budgeting is paramount. Investment terms often specify that management must provide the investors or the board an annual working budget. Developing a company culture that tracks results to budget will help you meet and exceed the expectations of your investors.
3. It will help you avoid running out of money. The No. 1 risk to any startup is running out of money. If you’re like most entrepreneurs, you’ll fluctuate between a conservative reality and an aggressive dream state, which keeps you motivated and helps you inspire others. When you build your budget, start with expenses, not revenue; they’re much easier to forecast. This will keep you grounded and reduce your risk of running out of money.