For many businesses whose fiscal year follows the calendar year – it’s the start of Q4. There’s still 3 months left in 2024, and we just KNOW you’re feeling that momentum from the first 9 months of the year. The Rocky theme song is playing, and you’re almost at the top of the steps (Eye of the Tiger is Jenn’s pump up song – IYKYK).

But while you’re striving for the finish line, this is also the best time to start thinking about how you can level up your business performance in 2025. This is the time to mastermind your business goals for 2025. We’re sure you already have some for your business, and maybe even your personal life too (Lindsey’s dreaming about Hawaii). But taking the time to put those goals on paper (ahem, spreadsheet) now will help keep you on track in the new year.

Internally, we’re going through this process right now. We’re diving deep into our current year performance and mapping out how we need to adjust to meet our goals for 2025.

Want to know how we do it? We make a budget. Keep reading for our step by step guide to business budgeting. The best part? You can copy and paste it into your own business right now, and set yourself up for success in fiscal 2025.

Step by step guide to Business Budgeting

Review your income and expenses for the current fiscal period

You need to look backwards to figure out where you are, before you can make a plan for where you’re going. This means you need to have a few things in order in your accounting house, before you can get an accurate financial picture. You’ll need to do the following before you can create an accurate budget:

Ensure your bookkeeping is up to date
Create reports showing year to date numbers, and comparatives to prior year. Just do the statement of profit and loss for now.
Make note of two things:
- Income trends throughout the year – does income go up or down with the seasons? Look for income growth or decline, ask yourself why it’s happening
- Expenses – Identify your 3 largest expense line items and identify each expense as either variable or fixed. Variable expenses vary with the volume of sales your business is doing (wages, cost of goods sold). Fixed expenses don’t change regardless of sales volume (website fees, annual software subscriptions, annual dues, rent etc).

Now make note of how you feel. Are you discouraged? Excited? Unsure? Sit with it. Remember these are historical figures. Learn from them, use them as a launching pad for 2025.

2. Create a business budget

We looked backward, now let’s plan out that forward momentum with a business budget. To create your business budget you need:

An Excel spreadsheet to enter your numbers
A copy of your profit and loss for 2024, showing comparables month over month, and year to date
A copy of your profit and loss for 2023, showing comparables month over month, and year to date

A budget doesn’t have to be over complicated or over-detailed. It gives you a baseline for revenues you expect to generate, and expenses you expect to incur for a given timeframe. It’s as simple as taking your historical numbers, adjusting for growth, and any expected expenditures.

Revenue budget:

Take your 2024 numbers and factor in expected growth for 2025. How do you decide on a growth percentage? It’s not a perfect science, and it will depend on several factors including the stage of your business lifecycle, industry and market influences. You’ll need your year-to-date numbers from your 2024 bookkeeping from step 1, and your year over year comparable numbers. Here’s two methods to calculate your growth:
- Annual year over year revenue growth: This method calculates your revenue growth rate from one year to the next and will distribute that growth evenly throughout the year so monthly revenue numbers are all the same. This is good for businesses who are just starting out, have minimal seasonality or just want a quick and dirty way to apply a uniform growth percentage. It is calculated as follows:
  - 2024 YTD revenue – 2023 YTD revenue/2023 YTD revenue * 100 = % of annual revenue growth
  - IE 2024 revenue = 200,000; 2023 revenue = 75,000. Revenue growth % is (200,000-75,000)/75000*100 = 166% growth rate
  - Using the YOY revenue growth calculation, we have a 166% growth rate year over year. If growth stays the same, our total revenues for 2025 are expected to be 200,000 * 1.66 = 332,000 or 27,666 per month for 2025
- Month over month (MOM) revenue growth calculation: This calculates different revenue growth rates for each month of the year based on historical data (IE growth from Jan 2023 to Jan 2024) or from one consecutive month to the next if you don’t have a previous year to compare to (IE growth from Jan 2024 to Feb 2024). Using this method allows you to apply different growth rates to each month and more accurately reflect business operations. Calculation examples
  - January 2024 revenue -January 2023 revenue/January 2023 revenue *100 = % of monthly revenue growth
  - IE Jan 2024 revenue = 8,000; Jan 2023 revenue = 5,000. Month over month revenue growth % is (8000-5000)/5000*100 = 60% growth rate
  - January 2025 revenues are expected to be 8,000*1.6 = 12,800. Repeat this process for each month of the year.

Expenses budget:

Since you’ve identified your variable and fixed expenses in step 1, budgeting for your expenses is simple.

Variable expenses: If variable expenses are directly impacted by sales volume, where appropriate, factor in the same growth rate which was used in the revenue section. Or, you can calculate the variable expense growth rate using the formulae in the revenue section and apply it to variable expenses in the same manner
Fixed expenses: Adjust for inflation, rate increases, additional user costs, fees etc
Anticipate: Most people will underestimate their expenses when going through the budgeting process. Remember to think about unexpected costs which come up as you grow – additional employees on payroll, training, professional development, increasing subcontractor and material costs etc.

Once complete, your budget becomes a static document which you review against current performance every month. It’s an expectation that becomes your baseline. Does it need to be 100% accurate? No. In fact being a little “off” on your projections can lead to valuable insight into customer preferences, revenue drivers (read more about revenue drivers and how they impact profitability here), and the value you’re deriving from your expenses.

3. Be accountable

Now that you’ve got your budget ready, make yourself accountable. Set up a monthly recurring “budget to operations date” in your calendar. When that date rolls around, here’s what you do:

Go over your past month’s operations and compare it to what you budgeted. Ask yourself the following 4 questions:
- How did the business do?
- Did the most recent month move the business closer to, or further away from 2025 goals?
  - If yes, what happened in the past month that can be replicated this month and next month?
  - If not, what happened in the past month that needs to change?

Starting off with this simple process can create huge improvements for your business and allows you to use real time financial results to make organizational decisions which support your goals.

Need a little help?

So there you have it! Give it a go yourself or get in touch with us to help you sort it out. Spreadsheets aren’t for everyone. We get it – and that’s where we can help. There is nothing we love more than helping business owners take back financial power in their business.

Feeling inspired? We have that effect on people.

Reach out and tell us why you stopped by today.