New Year's Resolution: Planning your Budget in 3 easy steps
- Cristina Zappullo
- Jan 6
- 4 min read
Happy New Year!
2025 is here, and we are moving on from the celebrations.
Now is the time to reflect on your achievements and set your sights on what you want to accomplish this year.
Use forecasting to plan your future year.
This lets you
review what you have done so far, and
plan what you are going to continue or improve this coming year.
You will gain more confidence and clarity in what you are going to do through strategic planning.
You will gain more focus and be quicker at finishing tasks, freeing up more time for other activities.
It will also give you a clear picture of how your financial year is going to go, which will eliminate any surprises and the stress they cause.
It's a shame that so many solopreneurs neglect this crucial step.
The general answer is "no time," which is often a cover for a lack of confidence in their planning skills.
Let's Gain Vision and Clarity by Planning Next Year's Budget!
Some solopreneurs and small business owners avoid overviewing, reviewing and planning for a number of reasons.
You don't know what to do.
It's difficult to look at how last year went.
You're worried you'll be locked in your plan.
You think it's complicated.
None of this is true.
You don't need to fix your forecasts and budgets in stone for the next few years. Forecasting is the starting point.
You can review your situation as you go along – perhaps every three months or at the end of each month – and you'll understand how your year is going.
Worse than not knowing what you need to adjust it's not knowing at all. When you know what's happening, you can adjust and improve your strategy.
Let's do it together with Chris, our friendly neighbourhood course creator, back from the festivities and ready to review her previous year and plan her next!
Step # 1: Gather Your Financial Review from the Previous Year.
How did your last year go?
We must have a starting point for our planning. We are using the previous year or, if you prefer, the previous years.
A financial review is a document that reviews all your spending and gains from the previous year. If you haven't done one before, you need to start. It's an eye-opener.
After I started checking, I discovered that my bank was charging me 10 euros extra every month! Thankfully, there was only a 10 Euro additional expense I could not explain. It could have been way worse!
I'm going to give you some food for thought so you can decide what's best for you.
Has your company grown a lot in terms of income over the last few years? If this is the case, you are better off with only the last year's balance.
You need to get the previous years' balance sheets.
If you are starting your company for the first time or have recently changed your accountant or bank, you may have difficulty locating your previous years' expenses.
If your company has been stable for a few years and you can find your previous financial records, use more than one year.
Chris hasn't done her yearly financial review yet, so she
goes to her bank business account and downloads the previous year's records,
labels each entry by project and department,
creates a pivot table to sum the amounts for each project-department combination.
She then spends a couple of minutes reviewing her last year's financial history. Some surprises are good – she actually spent a lot less than expected in the marketing budget – but some are to be improved, like taxes!
If you've never done something like a pivot table, the next issues will explain everything in detail. Subscribe to our newsletter so you won't miss out.
It's fine to spend up to all of January getting your next year's forecasting ready. Thinking over your strategies and what went well/bad last year will only make your next year's strategy more on point. So any time spent on this is well spent.
Step # 2: Are You Planning to Launch a New Offer in The Coming Year?
As you review your financial history, you must consider your company's offers and how they went.
If you will be introducing or changing some of your offers this coming year, how is it going to impact your expenses?
Chris has realised that one of her courses is costing more than it is earning. She needs to decide whether it is still worth it.
Is there really no value in keeping it around? This course is undoubtedly a stepping stone for her more loyal customers to get to know her.
Step # 3: Make a Budget Based on Your Previous Year and Your Planning Assumptions.
Now for the fun part!
Plan for the next year. Are you planning to introduce new offers? If so, you will have more costs.
Chris is going to rent a new office in a building she passes by every morning on her way to her current office. So she investigates how her costs would be affected by that change.
She also decided to add a new course and needs to know how much that would cost. She will use the costs of her previous courses to make this decision.
How many customers do you need this coming year? We have predicted the costs, but we still need to predict the customers.
Do you know their value?
Do all customers have the same value?
The reality is that there is no one-fits-all answer to this question. It depends on whether you have one customer journey or multiple ones.
You can figure it out if you have a customer journey. If you lack the confidence to do it yourself, follow the next issues.
Any issues?
This method will work much better the more stable your business is.
If you are just starting out or growing fast, this is an excellent starting point. However, you will undoubtedly need to make plenty of adjustments with each review.
If you have any other issues, please leave a comment or come and ask at one of our events.
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It's up to you.
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