Tired of Spending Money on Unanticipated Expenses?

Are you throwing money at it?

It’s that time of year. The crazy time when everyone is pegged to their max capacity. Demands and issues come at you from every direction.

…and sometimes, the easiest thing to do is to just throw money at the problem.

Which is cool and all. …as long as your budget accounts for it! As long as you’re not spending money that was supposed to be your profit!

My goal for today’s article is to prompt you to do one thing: review your expenses so far this year and compare them against your budget. Your goal is to find any actual expenses that are more than you had budgeted for, back when you built your budget at the beginning of the season.

For example, you had anticipated spending $20k on fuel this year. It’s only May, and you’ve already spent $14k. If you take that $14k and calculate what you’ve been spending monthly so far this year, you can get an idea of what you’ll ACTUALLY spend by the end of the year.

Being it’s mid-May, we’ll say we’re 4.5 months into the year. $14k divided by 4.5 is $3,111/month. Take that X 12 and you get $37,333, which is your annual total for this expense (if you continue spending at the same monthly rate for the rest of the year)

$37,333 minus the $20,000 that you had projected you’ll spend is a difference of $17,333.

Who pays for that $17k difference?

You do.

What was supposed to be your profit goes to pay for that.

And we’re only talking about one single line item in this example so far. If you get a couple of line items that are off… this is where you get to the situation where you work like an animal all year and get nothing to show for it. Less profit than you anticipated. Or worse, no profit. No capital left to invest in your business growth, equipment, or hiring someone to share your workload.

No money to hire someone

When you have no money to hire people to share your workload, you end up in this vicious cycle where you are the bottleneck, everything runs through you, and you have no money to hire someone to delegate. Stripping you of the ability to free up your brain energy to focus on the business, not in the business.

It’s easier to end up in this situation than not. Another way of saying it is it takes an intentional focused effort to not spend the money that was supposed to be profit on expenses. That “effort” means: checking your actual company expenses against your projected budgeted expenses, and adjusting and tweak as needed.

I have a friend that grew his business really quickly in a short amount of time. He doubled his gross revenue in under a year.

What happens when you double your revenue?

Well, your business grows. Which means your expenses grow.

My friend didn’t do the “budget check”, and by mid-season, he was having a cash flow crunch.

Why?

He was spending what was supposed to be profit on increased overhead expenses that were needed to fuel the growth. And, the quotes he was sending out were based on markups and calculations of his now out-of-date budget. Meaning every quote he was sending out was not priced correctly, and every job he won just compounded the worsening situation. The quotes were not priced high enough to cover his increased overhead expenses and have a net profit left over.

Thankfully the solution was easy. We did a quick analysis of the budget his quotes were based on, compared that to his actual expenses, found the issues, tweaked them, updated the budget, and were done.