PSU Insight

Writing Your Business Plan

Developing Your (Yuck!) Budget

Quite simply, your budget should address two questions — First, what are your primary sources of income? And second, what are your major expenditures? The answers to these questions will help in determining the success of your business.

These questions should be answered over a workable period of time. One year is a commonly-accepted time frame, and is satisfactory for most speakers.

Let’s start with this sample budget —

Keynotes $ 25,000
Training $ 35,000
Consulting $ 20,000
Product Sales $ 20,000
Marketing $ 20,000
Product Development $ 20,000
Operations $ 30,000
Net Income $ 30,000

This brief budget appears almost ridiculously simple. What can we possibly determine from running its numbers?

Actually, quite a lot! For instance:

  • This business derives roughly one-third of its income from training, about 25% from keynotes, and about 20% from consulting and product sales.

    This could be useful in considering “what if” scenarios, such as ‘What if this speaker doubles her income from consulting?’ That sounds impressive, but that’s really only going to produce a 20% increase in gross income. All things being equal, she’d be better off doubling her training income.

  • Although this business appears to “make” $100,000 in income, $70,000 goes back out in expenses. The business actually produces a net income of $30,000.

    You should be far more interested in your net income than your gross income, and a good budget is the only way to determine that.

  • This business makes $20,000 from product sales. Again, that sounds impressive. But this business also spends $20,000 in product development. So in terms of net income, product sales aren’t contributing anything to the business’s bottom line (in this year, anyway).

    This doesn’t mean that the speaker shouldn’t be developing product. There can be other benefits to having product than just net income. But if income is the primary reason for developing product, the speaker should certainly reconsider whether it’s worth doing.

These things and more can be determined from a simple budget like this.