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Surviving the first year: What freelancers need to know about budgets. The following chart outlines a range of emotions you may or may not experience as you move towards your goals:. Contact Info: Angel Rodriguez 215-427-9245 ext. 405 arodriguez@empowerment-group.org
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Surviving the first year: What freelancers need to know about budgets.
The following chart outlines a range of emotions you may or may not experience as you move towards your goals: Contact Info: Angel Rodriguez 215-427-9245 ext. 405 arodriguez@empowerment-group.org www.empowerment-group.org
Objectives • Explain what a Budget and a Cash Flow forecast are. • What is the difference between a Budget and a Cash Flow forecast. • Review your baseline information, forms needed in the first year. • The relationship between Cash Flow Forecasting and Strategic Marketing. • Introduce financial terms and Break-even analysis
Budgets & Cash Flow Forecasting
What is a Budget? • Budgets are financial statements setting out the planned future performance of a freelancer’s activities. • A budget allows a freelancer to plan ahead and then to check on their performance against their projected budgeted figures.
What is a Variance? • The difference between budgeted figures/ performance and actual figures/ performance is termed a variance. • Variance is an important management tool because it allows freelancers to manage their activities - i.e. to make informed decisions based on real information (i.e. how actual performance compares with budgeted performance). A positive variance is one where actual business performance proves to be better than what was budgeted for.
What is a Cash Flow Forecast? • A cash flow forecast - is a forecast of cash coming into and going out of a business based on previous experience e.g. last month, or last year. • A cash flow budget, is a plan usually to generate more cash coming into a business than going out.
What is a Cash Flow Forecast? • In order to prepare a cash budget a freelancer needs to know what receipts and payments are likely to take place in the future and the dates when they will happen. • It is important find the length of lead time between incurring an expense and paying for it as well as the time lag between making a sale and collecting from clients.
Financial Terms • Overhead Costs: costs that are incurred no matter whether any activity is carried out. • Fixed Costs: costs that do not change month to month. • Variable Costs: costs that do change month to month. • Income: the money that comes into your business. • Expenses: the money that you spend on items to operate or improve your business. • Break Even Point: the amount it takes to meet all your expenses while having additional income. EMPOWERMENT GROUP WWW.EMPOWERMENT-GROUP.ORG 14
The relationship between Cash Flow and Strategic Marketing
Target Market Revisited It Takes Time To Sell a Product or Service: As a general rule you should use a ratio of 10:1 to calculate the amount of time it will take you to close a contract or make a sale. So for every one Contract you close assume it will take ten 1 hour meetings to get to that point. For this example assume your monthly overhead is $2,000.
Strategic Planning Schematic Where are you now? Where do you want to be? By when? What is your GOAL? Everything above the red line, like planning, does not need a dollar value. How will you get to where you want to be? What is your STRATEGY or PROCESS? All tasks below the red line, require decisions and a dollar value. What will you do to accomplish your strategy? What steps and actions must you take? What will you do to accomplish your strategy? What steps and actions must you take? What will you do to accomplish your strategy? What steps and actions must you take? What will you do to accomplish your strategy? What steps and actions must you take?
