Learning CenterStage 2 · ControlGuide 13 of 22
By the Numbers
Budgeting 101
Set the plan, then compare every month.
A budget is the plan you write down before the year starts. Each month you hold your real numbers up against it, so you can see early where you are ahead, where you are behind and which line needs attention.
Six steps to a budget you'll actually use
- Start with salesA revenue goal by division and month, from last year plus work already sold.
- Set the profit goalDecide what you want to earn before you budget a single expense.
- Estimate job costsUse your target gross margin to set materials, labor and subs.
- List overheadLine by line: rent, salaries, insurance, fleet. Most of it is predictable.
- Spread it by monthMatch the season: a big May, a small January. Not 1/12 each month.
- Compare every monthBudget vs. actual. Act on the biggest gaps, like the example below.
Step 6 in action: budget vs. actual
Same month as the P&L example| Line | Budget | Actual | Variance |
|---|---|---|---|
| Revenue | $120,000 | $110,000 | −$10,000 |
| Direct Expenses | $46,800 | $43,700 | +$3,100 |
| Gross Profit | $73,200 | $66,300 | −$6,900 |
| Indirect Expenses | $5,400 | $5,000 | +$400 |
| Fleet Expenses | $11,500 | $11,850 | −$350 |
| Admin Expenses | $37,000 | $38,380 | −$1,380 |
| Net Profit | $19,300 | $11,071 | −$8,229 |
| Net Margin | 16.1% | 10.1% | −6.0 pts |
Green = better than budget (more revenue or lower cost). Red = worse than budget.
Reading this month
Sales came in $10,000 short, the main reason profit missed. Direct costs dropped with sales, as they should. Admin ran $1,380 over budget, so that's the line to dig into.
A budget is a plan, not a guess
Build it before the season starts, update it mid-year if things change, and use it to make decisions on hiring, equipment and pricing.
Key idea: The P&L tells you what happened. The budget tells you whether that's what you planned.
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