Before I walk you through the mechanics of outlining your Secret Plan, I want to give you a few tips. After that, I want to tell you a secret. A very special secret.
Here are four ways to increase the chances that your Secret Plan will work:
- Plan your income and expenses as a team, if that’s possible. For this sort of planning, two heads are invariably better than one. What’s more, although I don’t really want to get into marriage counseling or partnership counseling here, the budget of a business (oops; I mean its Secret Plan) needs to reflect the priorities and feelings of everyone who has to live within the plan: partners, partners’ spouses, key employees, and so on. So don’t use a Secret Plan as a way to minimize what your partner spends on marketing or on long-distance telephone charges talking to pseudocustomers and relatives in the old country. You need to resolve such issues before you finalize your Secret Plan.
- Include some cushion in your plan. In other words, don’t budget to spend every last dollar. If you plan from the start to spend every dollar you make, you’ll undoubtedly have to fight the mother of all financial battles: paying for unexpected expenses when you don’t have any money. (You know the sort of things I mean: the repair bill when the delivery truck breaks down, a new piece of essential equipment, or that cocktail dress or tuxedo you absolutely must have for a special party.)
- Regularly compare your actual income and outgo with your planned income and outgo. This comparison is probably the most important part of budgeting, and it’s what QuickBooks can help you with most. As long as you use QuickBooks to record what you receive and spend and to describe your budget, you can print reports that show what you planned and what actually occurred.
If you find that you’ve budgeted $1,000 per month for shipping costs, but you discover that you consistently spend twice that amount, you may need to shift some money from your monthly dress-and-tuxedo allowance … unless you like coming in over budget on shipping charges.
- Make adjustments as necessary. When you encounter problems with your Secret Plan — and you will — you’ll know that part of your plan isn’t working. Then you can make adjustments (by spending a little less on calling the old country, for example).
A word to the wise: Don’t gear up your business overhead or your personal living and lifestyle when you have a great year (or even a few great years) in the business. When you have a good year or even a few good years, keep your overhead and expenses modest. Stash the extra cash. If you can, build up some financial wealth that’s independent and apart from your business assets. Contribute to an Individual Retirement Account (IRA), for example, or set up a Savings Incentive Match Plan for Employees (SIMPLE) IRA or a Simplified Employee Pension (SEP) IRA for yourself and any employees.
