Money Matters in Q1
Great leadership requires the ability to control what is in your power to control, to give people clarity, direction, and a sense of security, to chart a course and set goals your employees believe are attainable. As we begin a new year, it is your job as the business leader to set and communicate expectations for the year ahead. From strategic initiatives to marketing campaigns, from new positions to new product lines, your company is waiting for you to clearly set the goals for the new year.
It also falls on your shoulders right now to make sure that your financial house is in order, that you understand thoroughly where you are today, how you got there, and have a plan moving forward.
Three areas of financial focus for Quarter One
We’re all eagerly anticipating good things from the year ahead. But hoping is one thing, preparing is another. Here are three financial objectives you really need to have in order to start the first quarter off right:
- Set Your Budget – Your budget is the financial plan for managing and controlling revenue and expenses over a period of time. Budgeting is a core business practice and a fundamental management tool that keeps you and your employees on course, and provides the radar to tell you when you’re off course. It’s fairly short-range radar — most budgets look ahead month by month for one year. It’s operationally oriented to help you and your employees manage the business on a daily basis.
A budget is developed from past trends and future predictions, and is a forecast of your income statement. It emphasizes profit and the path you intend to take to generate that profit. In addition to planning how you will operate in the near future, your budget is also a control device. It helps assure that proper measurement and evaluation procedures are established throughout the company. It provides a plan so that everyone knows where the business is going and what you expect by way of performance. It also gives you a way to measure that performance.
Need help developing a budget? The E-Myth Online program has extensive information, worksheets and examples that will help you with budgeting and much more.
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Determine Your Financial Goals – A big part of your budgeting process revolves around the financial goals you’ve set for the year ahead. Where do you want and need your business to be at the end of the year?
The main purpose of creating a budget is to plan the monetary results you’re going to achieve during the coming year, and then ensure that you realize those results. Rather than wait until the end of the year to see what happened, track your progress monthly and make adjustments as the year progresses. This dramatically increases the likelihood that you will, indeed, accomplish what you’ve set out to do.
If you haven’t already, it’s time to set annual goals (either revenue/profit or both). You can then break these goals into a series of twelve monthly goals for short-term strategy and monitoring. Remember that these are first-pass goals that will be refined as you grow your business.
- Communicate to your Team – At E-Myth, we talk a lot about the importance of creating your Company Culture, or “the way we do it here” and communication is the key. You need to make sure that your employees understand the idea behind the work they’re being asked to do. The most effective strategy is to broadcast and reinforce your vision and goals at every opportunity. This includes your financial goals. You may do this in a special meeting or incorporate it into your regular team meetings, what’s important is that you share your goals so your team can help you get there. Ultimately, you need your team to be working toward the same goal—financial success.
Some business owners are leery of sharing financial information with their employees while others believe in total transparency. Ultimately, how much you share is a personal decision. It’s up to you to decide what you’re comfortable with. At the very least, we recommend you share enough information so that your employees understand the overall financial health of the business.
One way to do this is to make sure that everyone in your business is aware of the financial implications of their respective positions. People who have no financial information can’t be held accountable for managing financial performance. They have to know the financial dynamics of the positions they hold before they can make positive changes. This can be a tricky topic, and we have an entire process in our Mastery Impact! coaching program dedicated to bringing financial awareness and accountability to employees at all levels of your organization. The bottom line is that the more that managers and workers become aware of their impact beyond their own positions, the greater their appreciation of their roles within the business and the greater their positive impact can be.
How your business does in Quarter 1 sets the tempo for the entire year. Make sure that you set the right tempo for the year ahead with clear direction, a realistic budget and the support of your team. Here’s to your success!
Share Your Story
Have you set your financial goals and budget for Q1 and beyond? Post a comment below and tell us about your challenges and triumphs.
Further Reading
Practicing Financial Leadership
Company Culture: A Game Worth Playing
Your Cash Management System
Six Steps to Maximize Cash Flow
Need help controlling the cash flow in your business? At our Six Steps to Maximize Cash Flow virtual seminar on January 21, an E-Myth Business Coach will help you identify and maximize the cash in your business. We’ll offer tips you’ve probably never even considered…
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