Your Detailed (Double Yuck!) Budget
The previous session shows the importance of having a budget. But there are many questions that this simple budget cannot answer. For instance, how much work does it take the speaker to earn the $25,000 from giving keynote presentations? If that’s one twenty-five-thousand-dollar speech, that’s one thing; if it comes from giving fifty five-hundred-dollar speeches, that’s something else entirely.
We get a much better understanding of this speaker’s business if we rewrite the ‘income’ portion of the previous budget as:
5 Keynotes @ $5000 each = $ 25,000
7 1-day Training Seminars @ $5,000 each = $ 35,000
200 hours of consulting (approximately 4 hours per week) at $100 / hour = $ 20,000
Sales of 500 books at $20 / book = $ 10,000
Sales of 200 CD sets at $50 / set = $ 10,000
This budget still isn’t sufficiently detailed, but it shows you how much more information you can get as you become more specific.
Similarly, under ‘Expenditures’, rather than simply listing —
Operations = $ 30,000
which really doesn’t tell us anything at all, it would be better to itemize the major operational expenses as something like:
Car lease = $ 7,000
Phone = $ 3,000
Insurance = $ 5,000
Postage and shipping = $ 3,000
Printing, (stationery and envelopes) = $ 2,000
Non-reimbursed travel expenses = $ 4,000
Association dues and expenses = $ 2,000
Fees and taxes = $ 3,000
Computer upgrade = $ 1,000
Now this gives us much better information. For instance, if reducing expenses became necessary, we have an idea where we could start trimming.
Notice that it isn’t necessary — or even particularly helpful — to be precise in your budget figures. After all, these are estimates. They should be realistic, but absolute accuracy is not important. In this example, all of these income projections and expense estimates are rounded off to the nearest thousand dollars, and that’s probably about right for this particular business.