Setting a budget for expenses

[mmotley]

I'm curious how many shop owners on here have an actual WRITTEN budget for their operation expenses. Not just a budget for advertising, but for all expenses. Last year, my sales grew quite a bit, but I managed to ignore the expense side of things. I would also be curious how some of you came to set budgets/benchmarks for things such as uniforms, utilities, accounting, shop supplies, office supplies, phone/internet, etc. And how often do you review your expenses.

I'm currently toying around with a spreadsheet, but I kinda feel like I don't know where to start on something like this. Any input/advice would be appreciated. 

[Joe Marconi]

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[Marksas]

I have a pretty detailed budget and budget everything from advertising, donations, employee relations (birthdays, dinners, lunches), inks, toners, janitorial, and even toilet paper. I have been doing this for years. It also looks at projected sales, tech efficiency, door rates, tech rates, training, certification test, dues, subscriptions, planned raises, effective labor rate, as well as allows me to see if we have the right amount of staff  based upon tech efficiency and projected sales.  I built a spreadsheet years ago and make upgrades to it yearly. I actually have my manager complete it now and I just review. We begin the process in October for the next year. We can get it completed rather quickly. We use it also to run "if, then" scenarios. Gives me the daily sales required to meet plan. It makes it much easier to sleep when you know what you need to do.  Interesting aspect of it is we don't "win" every day but we typically win the year. We know we will have bad days, bad weeks and sometimes bad months. On a daily basis we win a little less than 50% of the days. The service writers see where we are everyday and weather we are on plan. It makes a difference. Start simple and grow it. As Joe says it would be hard to explain or even go through in a forum and really takes a full day at best to really understand all the variables. If you're using Quickbooks you can do a basic one in there. It's not my favorite but it could be a place to start. 

Another benefit is when someone is requesting donations, advertising or any other expense, you can honestly say "it's not in the budget this year, or it''s not a financial priority at this time". 

Start now as it will be the best thing you can do for your business. As the famed Peter Drucker wrote  "What gets measured, gets managed" 

[Marksas]

To answer your question regarding benchmarks. Just run your detailed expense reports for the last year or two and you can get a good feel for what your spending in each category on average. I like to break mine down by the month. Since we pay bi-weeklly we always have two months out of the year where we have 3 pay periods so we have to adjust for that. We actual have it built into our spreadsheet so we know which months have 3 pay periods. We also project our workers comp costs as well as all of our benefits based upon number of employees.  One thing to remember is it's really spending plan as Dave Ramsey would say and you won't always hit it exactly. It's a target, and if you don't have one then it's the easiest way to waste money or have leakage. It brings a level of accountability for yourself. You should also share it with someone who will question you on it and help keep you on track. I don't currently have a business coach but the budget is shared with the manager and lead tech. The right coach can be very beneficial to you and they need to bring more value than they cost. I will say I have used Elite in the past for some service writer training and have been very pleased with them. I am probably going to hire a coach (most likely from Elite) for my manager to grow him and get a prospective outside of my own.