Needs Budget, instead of a Want Budget at Work
Are you too close to your expenses…
This past April, Luis, a in client of mine, reached out to me for help with his business, which he owns a chain of restaurants.
Unfortunately, with the Governor’s shelter in place order (COVID -19), Luis was forced to close his business, and temporarily furlough some employees.
But the problem was he still had to pay his store lease on his restaurants, even though he was forced to close.
My suggestion to Luis was to reach out to the landlord and ask if there was anything they could do to help the situation.
The landlord asked to see his financials and the last three months of bank statements.
Hmmm, what would have recommended here?
Luis did have some reservations on doing this and I encouraged him to be transparent with his current financial situation.
The landlord then set up a call with Luis to ask questions about some expenses in his financials.
After 30 minutes, the landlord quickly found over $83,000 in savings from expenses that Luis did not need.
Here’s a quick exercise on what tends to happen in business and in life.
What is this picture?
Hint: Most people wouldn’t mind some of this right now.
Hint: This is something you drink.
The answers are below, and the point is…
Many times we are too close to see exactly what may be a draining us in business or life.
Luis had racked up unnecessary business expenses that he didn’t need any longer.
It wasn’t until a new set of eyes from his landlord that it became evident
what he needed to do.
Wants vs. Needs
Wants are expenses that help you live/work more comfortably, and you could live without them.
Needs are expenditures that are essential for you to be able to live. For example: housing, food, gas, etc…
Here’s a great exercise you and your team can do with their expenses.
1. Begin by writing a list of all the things that were recently purchased in the last 90 days.
2. That means everything from toilet paper to insurance, including the five-course expensive dinner.
3. Working with your team, divide the categories into two buckets: wants and needs.
Your team will quickly understand the value of saving money.
In full transparency, Luis taught me a lesson as well. After reviewing my expenses, I found a few ‘wants’ that I needed to remove.
Do you currently have someone that is a fresh set of eyes for your business?
Do you have any expenses that are “wants” that need to be removed?
Email Hernani@BalancedIQ.com and let me know.
P.S. Luis’s business has reopened and all his employees returned. Plus he got a reduction in rent while the restaurant was closed. Yeah!!!
Answer to the exercise: Chocolate Bar and Coffee