Likely when you started out with your cannabis business, or were contemplating a start, you prepared some kind of budget or projection, something that you thought would tell you if your idea was feasible. Maybe you didn’t prepare it yourself but had a consultant or friend do it. The budget looked good, and off you went to get started in entrepreneurship. Life got crazy, and you never pulled the budget out again.
A budget or proforma (used interchangeably here) is what nerds like me like to call a “working document”. That’s because we work on it all the time. Over the past many years, I started a number of new businesses. The very first step, after the concept of the business was determined, was to create a proforma. A proforma is basically a budget that projects what you expect your business to do in detailed financial terms. I always prepared proformas showing month by month activity and usually projected out 5 years. That document was hugely important to getting the business off the ground because it was the primary piece of information presented to potential investors and to bankers from whom we were seeking financing.
The use of the budget didn’t stop after our business was open and operating. I tweaked it constantly throughout the project development phase and well into the first few years of operations. Until the business was clearly on track to meet or exceed the budget, I compared our actual financial results to the budget, to determine where we were on track and where things were not working out as we expected. It helped us to determine if our financing was going to be enough, how quickly we could pay back debt and how soon we would be able to reward our investors.
Sometimes a budget is just wrong. After all, it is only a guess as to what you expect, hopefully a well- educated guess. But by looking at it often, you can see where it is wrong and make adjustments to get the budget, or your business, back on track.
So pull that budget out, dust it off and see if you are operating the way you expected. Make it your “working document”.