How to Start & Run a B&B BandBED2eBook-1 | Page 18

Now you can see what a useful tool a budget is. Without it, our whelk stall holder
could not answer the sorts of question that arise every day in a trading business, for
example:
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The market landlord is increasing our pitch cost from £100 to £120: we can’t
increase our prices as we are already more than our competitors; how many
more tubs would we have to sell to make the sa me profit as before?, or
We tried selling at £1.95 per tub for a week and sales dropped to 475 tubs – is
this better or worse for us?, or
I could sell 400 tubs a week without my part-time assistant: is he worth
employing?, or
A local restaurant says they would buy 50 tubs a week of our cooked whelks,
but would only pay £1.10 each; we can get the extra wholesale stock at the same
cost price: is this worth saying “yes” to?
You can see that such everyday business questions, where decisions are usually
required quickly, are impossible to answer without an “economic sketch” of your
business – ie a budget. It really is that important.
Returning a moment to the politicians trading cheap jibes, one might reflect how much
the taxpayer may have saved if Fred had been allowed to do the budget for the
Millennium Dome. He could have demonstrated on the back of an envelope that a
£400m building could not possibly be an economic success in a 12 month trading life,
even if it was the most popular day out in the UK and charged a price most families
would baulk at. Fred would never have made such a foolish business decision.
As it happens, the Dome was the most popular tourist attraction that year, but was an
unmitigated economic disaster. Lesson: whelk-stall, Dome or B&B, budgeting is
absolutely essential!
We hope all this will demonstrate two things:
1. A good budget is a sketch of the economic essentials of your business, and how
these relate to your financial objectives; and
2. It must be accurate within reason and based on sound assumptions, but need not
(and should not) be over-complicated. And no jargon is necessary!
Combining the budgetary essentials above with a spreadsheet tool such as Microsoft
Excel gives you a fast, easy and flexible way of constructing, adjusting and monitoring
your business against your budget.
How to Start & Run a B&B
www.howtorunabandb.com