Just about every person in every type of business cringes at the thought of creating, presenting and finalizing their annual budget. This couldn’t be more true for the boutique hotel industry where resources, both human and financial, are limited — and so is time. This combination of factors can lead to an inaccurate and/or incomplete budget-creation process. In fact, I know of many boutiques that don’t create a budget at all. I don’t want to sound like a boutique resort management coach, but my advice would be to learn to love the budget process and embrace it — not hide from it.
Okay, you many never get to the point where you love it, but you can get to the point where it is possible to create a solid budget and business plan for the upcoming year. The key to creating a good budget and business plan is to spend the necessary time UP FRONT to put together the tools needed to create your budget and business plan efficiently and as accurately as possible.
When I went through this process several years ago with my small team here at Mirbeau Inn & Spa, it was one of the most daunting and painful periods of my career because it took an awful lot of work and time to get it right. But I can tell you based on the success of the years since that it was well worth the effort (and the all-nighters) that it took to get it right. Today our team has the tools it needs to go through a complete business-planning and budget-creation process from start to finish very efficiently and accurately. And, just as important, the owners have a very good idea of what to expect in the coming year and feel comfortable knowing their management team has a put together a sound financial plan.
Okay, are your shirtsleeves rolled up? Let’s get started.
First, assemble the tools you’ll need:
Make sure you have your property management and accounting software set up to provide good financial reporting. This is the backbone of the budgeting process. You have probably heard the saying GIGO — “garbage in equals garbage out” — and if you don’t have your software system set up properly, you will not be able to use historical data to accurately predict the future. If you are not 100% sure that the stats and reporting you are getting out of your software are accurate, take the time to set up them up properly and get the backbone of your business in place so you can get sound financial information out of your boutique.
- Historical reports including stats and departmental P&Ls are important tools for your managers to use when forecasting the future. Create the reports ahead of time and prepare a budget and business plan book (binder) with tabs separating the reports so they can be accessed easily. Make sure the departmental managers have stats and reports not only for their departments but for all profit centers so they can identify opportunities in other departments that can help make theirs more profitable.
- Create spreadsheet templates in Excel that are dynamic and allow for easy entry of data and stats that flow into the departmental P&L. If you are not familiar with Excel or a similar database program you should spend a few dollars to hire someone to help or talk with your employees, many of whom may already have knowledge of how to create spreadsheets.
- Design a business plan template that your managers can use to put words to their financial projections. Many boutique property owners and managers spend a lot of time tweaking numbers, but they don’t articulate how they plan to achieve them. Putting text on paper to explain how you plan to achieve your numbers will not only help the owners understand, but it will also help the managers think their way through the process instead of just plugging in numbers that make the bottom line look good. The business plan becomes a living and breathing document that comes to life during the budget-creation process and is continually updated throughout the year to ensure the manager is always looking for ways to improve and grow revenue.
In my next post, I’ll provide a proposed business plan outline. Meanwhile, I’d be interested in hearing how you’re doing on your 2013 budgeting process.