By Dave Ramsey

Dear Dave,

Should you do your small business budget the same way you do your household budget?


Dear Joe,

They’re a little different, but you’re still working with the same concept. With your business, you’re trying to project your income and expenses (thereby projecting your profit) for this month and the next two months. Those three months make a quarter. If you’ve been in business for a while, you can reach further out there and even project the entire year.

Really, it all just comes down to this: You still have to plan your income and your outgo. Sometimes small business owners have a tendency to forego long-term planning and live hand-to-mouth and crisis-to-crisis. Sure, we look at the profit-and-loss statements, but that’s kind of like looking at the rearview mirror while driving. Budgeting’s not rocket science. The planning and budgeting doesn’t have to be super-sophisticated as long you’re realistic about your operating costs and how much revenue you’re generating.

I can tell you one thing for sure, Joe. A lack of planning and handling money properly—making money behave by projecting revenue, expenses and those kinds of things—are the main reasons that small businesses fail. Then the owners turn around and blame “cash flow problems.” That’s a pretty generic term. And in most cases it’s a bunch of double-talk from someone who borrowed money and couldn’t make the payments, or had too much money going out and not enough coming in.

You’ve got to project into the future and think about what you’re going to do and how to make it happen. That’s all a budget really is. You’re saying, “Realistically, this is what we should make this month, and this is what we should spend this month.” It’s what I tell my team when they’re doing budgets. It’s not even goal-setting so much as having an informed and knowledgeable conversation with the marketplace.


Dave Ramsey is a personal money management expert and national radio personality. His three New York Times® best-selling books – Financial Peace, More Than Enough, and The Total Money Makeover – have sold more than 6 million copies combined. His latest book is EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank.