Build a profit-first budget to give what you want.
“A budget is telling your money where to go, instead of wondering where it went.”
Dave Ramsey
When it comes to small business accounting, most owners start their budget with revenue.
Big mistake.
Your business exists to serve you. So instead of asking, "How much will I make?", start by asking, "How much profit do I need?"
At GoAccounting, we’ve seen the difference this simple shift makes. By starting with your profit target, you can design your business to deliver the lifestyle and financial security you want.
Step 1: Start with your desired profit
Write down the profit figure that will cover:
Your personal living expenses
Holidays
Loan repayments
Little luxuries (yes, even your weekly pedicure)
Example: Let’s say you want $100,000 profit this year.
Step 2: Add your overheads
Next, add your fixed expenses - power, phone, rent, vehicles, insurance.
You can find these in last year’s financial statements, then adjust for this year.
Example: Overheads = $100,000.
Step 3: Calculate your required gross profit
Add your desired profit to your overheads:
$100,000 profit + $100,000 overheads = $200,000 gross profit needed.
Step 4: Work out your sales target
Divide your required gross profit by last year’s gross profit margin.
Example:
Last year’s gross profit = $180,000
Last year’s sales = $360,000
Margin = 50%
$200,000 ÷ 0.5 = $400,000 sales target.
Step 5: Make it happen - the 5 ways to grow sales
If $400,000 is $40,000 more than last year, focus on these growth levers:
Increase client retention – delight your customers so they keep coming back.
Increase leads generated – make better use of your networks.
Increase prospect conversion rate – refine your sales process to solve client problems.
Increase purchase frequency – stay in touch so customers buy more often.
Increase spend per transaction – what’s your “with fries with that” upsell?
If sales growth isn’t enough, review your variable costs and overhead costs to find savings, improve efficiency, and cut waste.
The golden rule
Never lower your desired profit. You’re the boss - your business should work for you, not the other way around.
Ready to build a profit-first budget?
Whether you’re starting fresh or want to take control of your cash flow, our team of experienced accountants can help you create a profit-driven budget that supports your goals.