How to Make Your Annual Budget Twice as Valuable

0:00 All right, I've said it before and I'm going to say it again. As an entrepreneur, everything you do should be a twofer. By that I mean, number one, it should move your business forward and number two, you should learn from it and get smarter. Become a better entrepreneur.

0:13 It's January and I'm looking at a lot of company budgets and I'm afraid that most of them are not twofers. This is an amazing opportunity that entrepreneurs are missing. You see, a budget that just shows 10% month over month growth in revenue or each month is going to be 180%

0:30 the prior same month prior year that's great but when you don't hit it you have no idea why

0:37 you didn't get smarter but if you build that budget from the bottoms up identifying the revenue

0:44 drivers and the sub drivers you'll have so much more to work with let me give you a simple example

0:51 let's take an e-commerce company e-commerce company the primary driver of revenue is the

0:56 number of web visits that combined with an assumption for conversion rate gets your your

1:00 actual revenue number for each month so web visits is the driver but web visits has many sub drivers

1:08 how much money you spend on google ads facebook ads social media posts will drive traffic email

1:14 campaigns will drive traffic seo will drive traffic and if you break down each of those

1:20 sub drivers to what you expect to come out of each one you then have the levers to know what to pull

1:25 If I spend more on Facebook ads, that's going to drive more Facebook traffic with its conversion rate and get me a certain amount of revenue.

1:31 If I spend more on Google, if I do more social media posts, and you are in control.

1:38 Inevitably, at the end of the first month, the numbers you put in that budget, you are not going to hit them.

1:42 They're going to be off. They're always off.

1:45 But you will now know why, because you can look at the drivers and sub-drivers, identify where your predictions were off,

1:52 and then use that new information by being smarter,

1:55 by understanding your conversion rates better,

1:57 by understanding your various sub-drivers

1:59 to predict what next month is going to be even more accurately.

2:03 And if you do this each month,

2:06 religiously updating your drivers and sub-drivers,

2:09 you'll be at the point where you will be predicting your revenue

2:12 and your expenses with uncanny certainty.

2:17 So please, as you're developing your budgets this year,

2:21 Think about building them bottoms up, identifying the drivers, the sub drivers,

2:26 and using it as a tool that gets updated every single month

2:29 and getting to the point where you can see the future.

2:33 It's almost like having a crystal ball

2:35 because that is going to make you a better entrepreneur

2:37 and that's going to make you hit your numbers.