Magazine for the professional limousine, charter and tour industry.
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24 LIMOUSINE, CHARTER & TOUR JANUARY 2017 WWW.LCTMAG.COM MONEY: BUDGETS Make Your Budget Generate More Profits Every line item in your budget needs to be examined religiously — and adjusted — to manage your way to a successful operation. By Tom Halligan, LCT East Coast editor B oston operator Mark Kini esti- mates about a million dollars "went out the window" over many years because of inconsis- tentcy in managing his budget. Although a successful owner for the past 15 years running Beverly, Mass.- based Boston Chauffeur, after hiring a consultant Kini discovered if you don't regularly review and adjust every line item in your budget, you will lose money. Although the company had good cash flow, a strong balance sheet, and solid net profit margins, Kini said it was a "game changer" after he learned how he really needed to embrace and manage the details in his budget all year. With a 20-vehicle fleet and a background in business, Kini said he learned to hone in on five key areas: Financials, marketing, sales, operations, and human resources. "You have to have a clear strategy about your budget plan and recognize that cash is king," Kini said. "Numbers don't lie. So you have to pinpoint any reckless spending by looking at every budget line item and ask yourself why this is happening — then adjust." Little Things Add Up For example, Kini mentions office supplies as a line item. "We looked at that line item expense and you look at the trends and we found we were not as disciplined as we should have been. We looked at the vendors we were using and asked our- selves, are we getting the best prices and any ancillary benefits from using one ven- dor over another, such as free shipping or cash back? That's managing your budget to keep expenses low," he explains. One of the key components in prepar- ing and staying on budget is factoring in "unknowns," advises Ron Sorci, founder and CEO of Miami-based Professional Consulting Resources, Inc., and a LCT fi- nancial columnist. "You have to factor in unforeseen events that disrupt business, such as a lawsuit that requires hiring an attorney, loss of a major account, increas- ing insurance, and other events that can disrupt cash flow." Micromanage The Money As a former CFO of Aventura Worldwide, Sorci knows from experience staying on top of your budget is the best tool for an operator to run a profitable operation. "January is the perfect time of year to prepare a budget by reviewing your histor- ical data and preparing for the New Year. For example, do you plan on increasing your rates in 2017? Then you need to fac- tor the increase into your budget." Sorci, who writes the "Profit Driven" column for LCT Magazine, is a firm pro- ponent of paying attention to the details of running your company. He says opera- tors need to be as objective as possible in preparing a budget, and revisit it often to ensure your are on track. "The first thing operators need to do is list every single line expense and figure out what it costs them to run their business, all their expenses, and then break down every single source of where revenue comes from (corpo- rate, retail, etc.) and plug in what you want your profit margin to be. In this industry, it ranges from 8% to 13%, so if you want to make a 10% after tax profit, plug that into your budget." As a consultant — and echoing Kini's advice to stay on top of your budget — Sorci advises operators to review their budgets often to stay on course. "You should review your budget on a month- to-month basis and every three months