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SEPTEMBER 2012





Why Budget?

Ruben Estrada - CEO Coach

Of the hundreds of CEO's I have coached over the years, we found that less than 3% of them made it a discipline to do an annual budget. That Was The Good News. BUT after an Estrada Strategies coaching session, we discovered their budget was not a true operational budget that could provide each department manager with a set of clear financial goals.

SO....NOW WHAT?
First let me tell you that 100% of the fortune 1000 companies do annual budgets. A common reason smaller business owners give for not doing a budget: "I don't know how". Sound familiar? Numerous business owners have no financial background and cannot read their own profit & loss, balance sheet or cash flow reports. A huge problem, because understanding and managing your finances is critical to the short term and long term survival of the business. There is hope and it lays within this simple statement, "Don't do it alone".

Another common response is: "I have never needed a budget before." OK...time for a useful story - but don't take as a sales pitch for Estrada Strategies.

I once had a client whose 150Million Dollar business had never, in 25 years, produced a financial budget. The CEO was proud to tell us that he never looked at his own financials. Weird? No. Typical? Yes. However, late in 2008 the CEO sought help to set up a budget for the New Year. His company was very IT dependent. The company needed new servers and computers, but were strapped for cash.

Estrada to the rescue! Even in the early stages of the budget process, significant opportunities for overhead reduction were realized. Cell phones and gas cards exceeded $20,000 per month. As we reviewed the historical financials, line by line, and were able to reduce another $35,000 of monthly expenses that could be cut with very little impact to operations or employee morale.

As a result, they had money for new computers, they built liquidity on the balance sheet and managed 2009 with a much higher degree of certainty and confidence. A fantasy story? Not-At-All.

So, what is the point of this article? Doing an annual financial budget and managing from that budget is a critical "Discipline" for every business, regardless of size. And if you are honest enough to admit that you do not know how to create a budget and manage your business with one, then you are on the road to removing the veil that's been keeping you from seeing the financial indicators that drive your company's overall health and performance. Not to sound negative...but for you who would prefer to operate your business with your eyes closed (so-to-speak), try this: Get In Your Car, drive it on the freeway at 90mph and close your eyes for 3 minutes. "Why would I do that" you say. Excuse me for the arrogance, but if you run your company that way...why not drive that way, you dare-devil you."

Allow me to end on a positive note. Your business can be healthy in a down economy all because you are willing to make the commitment and investment to make it so. Want Help? I'm available.

{short description of image}Written by: Ruben Estrada, President/CEO Estrada Strategies Franchise Inc.
A National Network of CEO Coaches.
We help the small to mid-sized business owner to think, act, and perform like successful CEO's.
www.EstradaStrategies.com
909-476-3510

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