Your Business Budget, Finally Simplified

Thought I might start today's show with a question because I want to be real about something when I say the word budget. So you to think for a second when I say that word budget to you, what's the first thing that comes to your mind? Really?What is that first thing that comes to your mind? For most small business owners, it's a spreadsheet that you never look at.I asked this question of a couple clients as I was preparing for today's show. I said, hey, I said the word budget to you. What would you think? Like, oh, that's something Ralph wants me to do.Or it's this spreadsheet that I work with, but I never look at it. People said to me, ralph, it's formulas I really don't understand. And one guy actually said to me, I thought this was classic.He said, ralph, it's a constant reminder that money is going out faster than it's coming in. I said, well, that's a really good way to look at it. Not a very effective way to look at it, but maybe a really good way to look at it.And here's the crazy part. Listen to this. A U.S. bank study. I was shocked when I read this U.S. bank study found that 82% of businesses fail.Now, I knew there was a big business failure, but 82% fail because of poor cash flow management bigger than that and a lack of understanding of their finances. Robert Kiyosaki said this, and I think this nails it. He says, if you don't know your numbers, you don't know your business. 82%.See, that's not just bad luck. That's just bad budgeting. That's bad understanding of your finances. But here's the good news.And this is the good news that you absolutely need to hear today. It's the whole reason I'm doing today's show. This is going to be the major takeaway. Budgeting doesn't need to be complicated.So many people hear the word budget, like, oh, there's going to be a complication. In fact, and here's the truth for today, it's simpler than you think. And the simpler you make it, the more powerful it becomes.So today I'm doing a show of how to create a simple three bucket system. A three bucket budget system that can give you clarity, control, and yes, here's the big takeaway today. And even confidence with your business money.Are you ready to have confidence in your business? Well, make sure you stick with me today.

Running a business isn't easy. It's long hours, tough calls and relentless pressure. No shortcuts, no handouts. Just grit, grind and the will to keep going when most would quit.Welcome to Grit and Growth Business, the show for entrepreneurs who know success is built the hard way.Hosted by Ralph Estep, Jr. A seasoned business coach, accountant, and fellow fighter in the trenches, each episode brings you real talk, proven strategies, and the unfiltered truth about what it really takes to build something that lasts. Because if you've got persistence, perseverance, and determination, this is the place for you. This is Grit and Growth Business.

Welcome back to Grit and Growth Business. I'm Ralph Estep, Jr. And this is the weekly show to help you really grow your business and really empower you as a small business owner.And today, I really want to help you cut that chaos. And I want to help you grow with confidence. If you missed any of our shows, I can't believe it. We're actually on episode 19.Seemed like I just started this the other day.But if you missed any of our shows, you can find them all@gritandgrowthbusiness.com and hey, while you're there, don't forget, sign up to get our action sheets. Whenever I do a show, I do an action sheet. You can do that@gritandgrowthbusiness.com action. Again, that's grit and growth business.com action.But today, I really want to talk about taking that fear out of budgeting. Like I said, what's the first word that comes to your mind? We talk about budgeting. So many people said to me, ralph, it, it's complicated.I don't understand it. It's a prison. Actually, one guy said it's a prison. But today, here's my promise to you.If you can hang in there with me, I'm going to give you a simple system by an expert. And I am an expert. I've been doing this for 30 years.I'm going to show you how to build some wisdom, and I'm going to give you some practical tools to actually help you get better control of your business. I'm going to tell you I thought about today's show. So many of my clients do what I call bank balance budgeting.Maybe thinking, Ralph, where are you going with this? Here's a picture for you. You might be one of those people listening right now.You open that bank account app, you check the number, and you hope it's good enough. That's what I call bank balance budgeting. Hey, if there's money in the bank, we are good to go.The problem is that just creates stress, and you live in this constant state of reactivity that's not strategic at all. If you've been listening to the show for a while, you know, I grew up in accounting. I want to tell you a story about this client of my dad.I remember I was just a young kid at the time, and he had this friend. His name was. We'll call him Gary, for example.I don't like to use real names on this show, but Gary had a business, and this is the way Gary ran his business. Now, this was before banking apps.When you wanted to know what your bank balance is, you got in your car, you went to the bank, or you picked up the phone and called. Well, Gary, every morning, his first thing, once the bank opened up, he was on the phone calling, how much is in my bank account today?And that was going to be his reactiveness for today. If the balance was low, he was jumping in the car and running to the bank and putting some money in the bank.And I found this Stat clutch did a survey. 61% of small business owners don't create an annual budget. And you know what? That's the truth. Because that thinks 6 out of 10 don't have a budget.And we wonder why so many small businesses fail. And I'm not judging anybody today, but that's a reason. What did Robert Kiyosaki say? If you don't know your numbers, you don't know your business.And John Maxwell had this quote, and I wanted to include it in today's show. A budget is telling your money where to go.And instead of wondering where it went, so many of the people that I've worked with, that I've coached, that I've counseled over my 30 years in practice, say to me time and time again, Ralph, you say, I made a profit. A lot of times we see this at tax time. They'll say to me, ralph, you said I made a profit, but, man, I don't know where the money went.I actually had a guy say to me the other day, he said, but isn't checking my bank account enough, Ralph? I said, well, truth is, yeah, basically, I can't really argue with that approach.If there's money in your bank account, that means you've got revenue dollars coming in the door. But are you being strategic in that, or are you just reacting? I even took it a step further. I'm a little bit of a transparent guy.I kind of shoot for or speak from the hip sometimes. I said, that's not budgeting. That's gambling. I tell you about a client, a contractor client of mine. His name is Tom.Tom ran a landscaping crew, five man landscaping crew.Every Friday he would sit on pins and needles just hoping that the bank would have enough to cover his week's payroll because his guys expected their checks to clear. And he often wasn't sure if they would. Not sure if that person was going to make that payment just in time.And I remember him telling me many times, he said, rob, I check my bank account four, five, six times a day just to make sure all those deposits hit. And then I'm worried about fuel, I'm worried about materials.He told me one time, he said, rob, I feel like my bank account controls me, but I'm certainly not controlling it.And when we finally set up this three step bucket budget approach, I'm going to talk to you about today, remember, he leaned back in his chair, he said, I took a deep breath for the first time. Ravi said, for the first time, I know exactly where my money's going. Not guessing anymore.And as you're joining me today, maybe you felt that same knot in your stomach on payroll Friday. I have so many clients that say to me, man, don't call me on Fridays, Ralph. That's a stressful day. And that's why this framework matters so much.So let's start off with a big idea. Because I like to do Things at a 30,000 foot Big Idea view. The first thing you've got to embrace is a little bit of a mindset change.Most people think a budget is a prison. It's a restriction. But I want you to really change that mindset.I want you to consider it a roadmap because it really is a roadmap when it's used correctly. And it doesn't have to be sophisticated and complicated. These big, long, elaborate spreadsheets. That's not what I'm talking about.It's all about simplicity. It's about stickiness, and it's about finding power in clarity. Michael Moskowitz wrote a book called Profit First.I kind of did a little bit about that on the show a couple weeks ago. And he said this, and we need to really embrace this. This is the mindset shift we got to think about. He said this. He said, profit is not an event.Profit is a habit. And, you know, we can all learn from that. Profit is not an event. It's not just going to happen. It's a habit that you build over time.It's something that you refine. It's an exercise. So now you're probably thinking, Ralph, but doesn't a budget limit me? If I have this budget, right, that means I can only do this.I can't do it. Listen, I'm a small business person, Ralph. I gotta be flexible. I gotta be able to move with what's going on.There's things out in the field I gotta be able to handle. And I'm gonna answer that question with no, it doesn't limit you. It actually liberates you and it frees you to grow on purpose.Let me tell you about a client I have. She owns a boutique. Her name is Sarah now, beautiful boutique downtown here where I'm at in my office. Her window display sparkled.She had beautiful Instagram posting of all the beautiful things she does. Customers absolutely adored her shop. But let me tell you right now, what you don't see in front of that polished exterior.Well, Sarah was exhausted when her and I first started working together. She shared and she said, ralph, I haven't paid myself a dime in three years. And I said, well, how are you paying your bills?She goes, ralph, I'm just running up my credit cards. My poor husband keeps subsidizing my business. Every sale went right back into ordering new inventory or boosting her social media ads.I never forget, it went on our second meeting. She goes, ralph, I feel like I'm working for free. Free. You might be joining me right now. You're thinking, rob, I work for free as well.Not a fun place to be, isn't it? But as we work together, we did.And I'll tell you about how to get my coaching service a little bit later in the show, I challenged her to put 20% right off the jump into her owner's pay bucket. So that's where you got to start. You got to pay yourself first. And it was revolutionary for her.She said, I remember her saying to me, she said, rob, how can I take money when the business still needs so much? And that's the mentality she had. She's like, wait a minute, Ralph. If you look at my books, Ralph, I've never made a profit. But she did it anyway.She took my advice and did it. And we worked together for a 12 week coaching program. And three months later, I never forget this. Made my day. She came in and sat down with me.Now we can do those by zoom or we can do those in person. But she came down. This was a lady was local to me. She sat down in front of me, she hands me a paycheck. Stubborn. I said, why are you giving me this.All of a sudden, her eyes started to tear up and she says, ralph, this paycheck wasn't just money for me. It was proof that my business was finally working for me, not the other way around. That was amazing to me because it wasn't just money.It wasn't about the money for her. It was about that acknowledgement that this business was viable. It was the acknowledgment that all the time, the hard work.Are you putting in that time and hard work right now? Are you listening or watching me right now? You're like, ralph, man, I feel where she's at. I work so hard in my business, Ralph, I.Blood, sweat, tears, all the things that I give away. Time for my family, Ralph. But I wonder sometimes if my business is working for me or am I working for my business?And that's why today I really want to develop this, what I call the three bucket framework. Because budgets don't have to be some elaborate, complicated thing. They really can be pretty simple. So let's dive right into it.Just three simple buckets. Bucket one is what I'm going to call your operations.This is going to cover things like rent, payroll, supplies, marketing, insurance, utilities, all the things that make the business happen again. That's rent, payroll, supplies, marketing, insurance, utilities. Those bills that you're paid on a monthly basis. And I'm gonna give you a benchmark.This should be no more than 50 or 70% of your revenue. I just want to start that as a benchmark because if it's higher than that, guess what?You're gonna be one of those starving owners, and you're not gonna be paying yourself. Tell you about a client of mine that has a bakery. Her name is Lisa. Now, every morning at 4am Lisa unlocks her doors.This little bakery on Main Street. Just pictured a few. We can. I can always smell the cinnamon roll. Smells really good to me this morning as I'm recording this.But the cinnamon rolls fill the air. Her loyal staff. She's got great people that work for her beautiful bakery. You just. You can smell it.The door opens up and people just come teaming in there. But Lisa showed me her numbers as we were working together. Last month, she had $14,850 in expenses. $12,000 of that went to operations.L, rent, flower, payroll, packaging. If you're doing the math, that's 85% of her revenue was going to operations.She shared with me something, and she didn't want to say this to me, but I kind of already knew it. She said, ralph, I'M the lowest paid person in this place. And that was wearing on her, it was wearing on her family.She's like, I'm not sure how much longer I can sustain this. But 85% of her revenue was, was going into the first bucket. Now to be honest with you, I was able to sit down with her.We trimmed some unnecessary cost, we switched some suppliers, we simplified some packaging, we cut a ton of waste. And working together for three months, listen to this. Her operational cost went from 85% to 65%. That's a 20% reduction in just three months.And she finally was able to pay herself. Now she wasn't paying herself a huge number. If I remember correctly, she was paying herself two, two thousand dollars a month consistently.But she said something to me which really stuck with me. That's one of the reasons that I am so passionate about what I do.She said to me, for the first time in two years, Ralph, I don't feel like a prisoner in my own bakery. She said to me one time, she goes, ralph, when I open that door, it's like I'm opening a door to the prison and then I lock myself inside.You feeling that way right now as well because you've created this, your own prison, we can fix that. So that's the first bucket, operational expenses. Let's move on to the second bucket. Like I said, this is a simple, very simple budget strategy.Second bucket is owner's pay. This covers your paycheck. And listen, this is non negotiable. Like I said with Lisa, this was her $2,000 non negotiable.I want you to benchmark this one as well. This needs to be 20 to 30% of your revenue. So when that revenue dollar comes in the door, 20 to 30% goes into your owners pay bucket.Dave Ramsey said this. You got to gain control of your money or the lack of it will forever control you. And I think that is so true.So many of my small business clients have learned this. You got to gain control of your money or the lack of that control is going to make it control you.Let me tell you about a client I work with that had a fitness studio and her name is Maria. She ran a little boutique, small fitness studio. Her clients loved her. Her clients thought she did a great job. Man, she got people in shape.But let me just say something right now. Her husband didn't love her so much. Why? Because for 12 months she hadn't paid herself a dime and it was all falling on him.And I'm not judging their Relationship, not by any stretch, but you can understand the animosity that was created. You can understand the stress that was created. Every dollar of hers went back into shiny new equipment that she needed.She thought she needed all these things. And she told me a story when I started working with her. She said, ralph, one night I walked into my house with guilt written all over my face.And she goes, I didn't know what to say to my husband anymore. And I finally broke down. I remember her telling me the story, and it's like, I think it saved their marriage. Honestly.She said to her husband, she said, I knew, I figured it out. She said, I'm serving everybody, but I'm not serving my own family. And when she came in and sat down with me, I said, man, we got to fix that.We got to change that dynamic is not going to be good for the long term. She was a great fitness instructor. She had helped so many people.She helped friends of mine actually lose weight and get themselves in shape for the first time in their life. But here she is destroying herself on a daily basis, destroying her relationship with her husband and her family. She said it best.She says, ralph, I'm serving everybody but my own family. So the first things we did, we started carving out that 25% for her owner pay and never forget. She resisted it.She goes, wait a minute, I'm being selfish. I'm not going to be able to serve my customers. I'm not going to buy that equipment that they need.But within three months, just three months, she was writing herself a consistent paycheck. I never forget, she pulled me aside one day. She said, ralph, it wasn't just about the money. And I knew it was deeper than this.I mean, she said, she goes, it was about my husband and kids finally seeing this business as a blessing instead of a burden. Her whole mindset had shift. Why? Because she just changed that mindset of that bucket.She was now putting that money in the revenue, in the profit bucket to pay herself. So that's the second bucket, first bucket operation, second bucket owners pay third bucket, future profit and expansion.Because you got to cover things like taxes, you got to think about savings. You got to pay down debt. A lot of small business people, when they first start off in business, go into debt.You got to figure out, how am I going to pay that down. Here's another thing. A lot of small business people don't think about retirement. They're working so hard, they don't even think about it.When you work for somebody else, you might have a shiny 401k plan or an IRA plan. But so many of my small business clients don't think about retirement and they also don't think about growth. So here's the next revenue benchmark.I want you to put about 10 to 20% of revenue into this future profit savings tax bucket. Because profits got to be intentional. I mentioned that in a show or two, a week or two ago, profits got to be intentional. It can't be a leftover.Let me tell you about a restaurant owner client I had, David. Now, David was a typical restaurant business owner. I deal with these folks all the time. He dreaded taxi.And I'm talking about this dude hated tax season because he hadn't prepared for it. Every April, he walked into my office. He was pale, he was sweating, and he was ready for the surprise of a lifetime. Happened year after year.Feast and famine, it always was the same. I would keep track of his income and expenses, but I wouldn't hear from this dude all year long.And he'll come in and say, okay, Ralph, what do I owe this year? Listen, I tried to encourage him so many times. I said, let's meet once a month. Let's meet once a quarter, even.Hey, let's meet once a year, even a couple times a year to just sit down and go over things. But he never wanted to take that. He was so busy running his business, but his business was truly running him.And I said, don't you want to break free of this, Dave? Don't you want to stop that? Living in that stress of how much am I going to owe this year, Ralph? He finally said, ralph, okay, let's do this.We started meeting monthly and we started putting together this three bucket framework. And for him, we set up that future bucket. We put 15% of every deposit into, into a separate account that was completely off limits.You know what I was thinking in my mind, right? He's thinking, well, Ralph, what is Ralph up to here? So fast forward 12 months, April again.He comes in and sits down and I said to him, okay, here's what you owe in federal tax and state tax. He goes, see Ralph? He said, nothing's changed. He said, this is exactly why I told you I get so stressed out about this.I said, but David, what you forgot to remember. Remember that money we've been putting inside every month? He goes, oh, yeah, I forgot about that, Ralph.So as I told him how much he owed, I said, but here's the beautiful part of this, David, guess what? You don't owe a dime Brother, we've already got this accounted for. I said, you've got the money right here in this separate bank account.Honestly, he had totally forgotten about it because it just became the routine, it became the habit that he did 15% of every deposit. I would just carve it right out of there for him, put it into that separate account. It was his money.It was his money all along, but he learned to live without it. He paid himself, he paid his operations, but he also had that money set aside.And he said to me at the end of that meeting, he said, for the first time, Ralph. And I thought this was kind of cool. He said, ralph, I feel like a grown up in my own business, a grown up in his own business.Just a simple three bucket framework for this. But think about how dynamic that can be.The stories I told today are real stories of real people that I work with day in and day out, month in and month out, to really help them change the dynamic of their business. And this isn't about perfection. So many people think, oh, if I'm going to do a budget, if I'm going to do this right, it's going to be perfect.No, it's not going to be perfect. Let me tell you right now, if you're a small business owner, it's not going to be perfect. But it's about visibility and it's about control.Let me tell you about John, the H Vac owner. Now, John owned an H Vac company. He put in $20,000 a month in revenue. On paper he would say, ralph, I'm successful.What he said to me is, ralph, I feel broke all the time. So many small business people I work with say this same thing.Ralph, I see the revenue dollars coming in the door, but the end of the day, there's nothing left. I feel broke all the time. So what did I do with John? He signed up for some coaching. We broke down he his stuff into buckets.And in John's case, we actually discovered he was wasting $1,000 a month on old software subscriptions. He had a truck that was sitting there collecting dust that he was still paying rent on.He had a bunch of parts sitting in his lot that he didn't need. So one of the things we did, we worked together, we cut the fat and we directed that $1,000 a month into owner pay and future expenses.You can do the math. A year Later, John had $12,000 saved for taxes and, and he was finally paying himself consistently.I never forget, John said to me, said, Ralph, he said, I always Thought this was about sales. My old accountant used to say it's about how much more revenue you can get in Dow. He said, I'm out there hustling.Said, I thought I needed more sales. I just needed a better plan. Maybe right now you're listening, you're realizing, ralph, I need a better plan too.See, it's not about perfect percentages. I talked about benchmarks. These are the things that should be. It's not about perfect percentages. It's about visibility.Because those three buckets, stop the guessing and put you back in charge. You want to be in charge of your business? Stop guessing and embrace this three bucket work.So here's a quick action item that you can take this week, right now, to change the dynamic in your business. And you don't have to be a rocket science to do it.I just want you to pull the last three months bank statements and just sort every expense into three buckets. And now you're probably saying like a lot of people say, ralph, wait a minute. You mean I gotta track every single expense? Well, guess what?You should be doing it anyway for compliance purposes. But for this, it is imperative. Yes, track every single one and put it into those three buckets. See what your percentages are.Because small leaks sink big ships. I did a workshop not too long ago. After one of my workshops, a business owner texted me the next morning. She said, ralph, I did what you said.I embraced what you said. I printed my bank statements for the last three months. I sorted everything into three columns. I did it in 20 minutes.It didn't took me very long to do it. And I found $800 a month that I was wasting on subscriptions. I don't even use anymore things in the business we don't need. I cancel them today.That's $800 a month back in her pocket. She didn't add new clients, she didn't add new revenue. No extra hustle. Honestly, no extra work. Except for looking at things and finding that clarity.See, framework is simple. I can give you this framework. I can show you exactly how to do it. But the key to this and all of these things is consistency. That's the challenge.And most small business owners quit because there's no accountability. So you might be saying, ralph, you know, I love this idea. I'm going to download your action sheet.I'm going to go to gritandgrowthbusiness.com action. I'm to going to get that action sheet, Ralph. But I'm not sure it's really going to impact me why would this time any different?Ralph, I've always tried to do this. I've always tried to build clarity in my business. But you don't have to do it alone this time. One client told me, she said this.She said, ralph, I've read every book on business. I've read every finance book. I know the theory, but I just can't make it stick. I'm going to challenge you right now with my coaching services.We can sit down together, we can review those buckets, I can hold you accountable, we can make those little tweaks, those little adjustments, just little by little things. And in a year, we can double your owner pay. We can really build that emergency fund for your business.I had a client say to me, she goes, ralph, the framework was simple, but having you walk with me made all the difference. And now you're thinking, ralph, I'm listening to this. You're thinking, I've tried budging before, Ralph, and it never sticks.And that's exactly why I offer coaching for small business owners just like you. Because you don't just need information, you need a guide. You need somebody who's been there, who knows how to make the numbers work.Somebody who can walk with you as you build a business that doesn't just survive but actually pays you. Yes, you can have a business that actually pays you. You can have a business that actually grows with you. And.And yes, you can have a business that grows and gives you peace of mind. So here's what I want you to do. If you're ready to get started with that, I'm encourage you right now.Let's book a 15 minute, no obligation discovery call. Just go to gritandgrowthbusiness.com coaching and book your 15 minute discovery call with me.We'll talk about your business, I'll get to meet you and we'll see if we can look at these things together and really give you some clarity. We'll sit down, we'll take a look at your numbers. I'm going to show you exactly how to start applying this framework to your business.I'm not going to give you pressure, no jargon. It's just going to be you and I having a conversation. I just want you to find that clarity.And if you're not ready for that, what do I encourage you again to download my action sheet for today's episode? You can get to it by going to grit and growth business.com action.Because this action that I built today will help you step by step create that three bucket budget. It's really not that complicated because your budget deserves clarity. So I encourage you to do that just today. So I hope I made my point today.I really want to encourage you. There's so many small business people that are continually struggling in their business because they lack clarity.They don't know where their money's going. You can change that dynamic today. It just takes a little bit of work and a mindset shift. So I want to encourage you to do that today.So thank you for joining me this week on Grit and Growth Business. Every week I try to bring you intentional and practical things to help you take that business to the next level.Now, next week we're going to talk about pricing because so many small business clients get stuck on pricing. So make sure you join me next week. But now I want to encourage you one more thing. It's great to have good intentions.It's time to put these things into action, live in those trenches, work hard, and don't forget. I'll see you again next week. God bless you and and you have a great week.