Let’s Do Business Budgeting Like a Chess Game
Let’s Do Business Budgeting Like a Chess Game
This article IS NOT written by a chess master
When you just thought of a brilliant business idea, you got really excited. It’s kind of like getting an adrenaline high. You feel energetic, confident, and even elated. You can go on for days with little sleep.
That’s probably not the case when it comes to the nitty gritty of having your business idea translates into a real enterprise. It’s hard work but which you are obliged to do in honour of your brilliant business idea.
It is safe to say that not everyone is up to it. And, those who do, may not have a clear guide on how to do it right let alone have fun while doing it. So, here is a simple set of ideas of doing business budgeting in a fun way? linking every step to moving a chess piece i.e. the pawn, the knight, the bishop, the rook (castle), the king, and his queen. Here’s how you do it:
1. Move your centre pawns
This first move is pretty much SCOUTING. In action movies (and in real life too), people send pawns to scout out the current situation before deciding on the next moves. This is like warming up before actually setting up your business. Find existing businesses that are most likely doing what you plan to do, or close enough. Learn about the industry that your business should be in. Talk to business people, especially those in the industry. What you need to extract from all these searches and conversations is the real costs of setting up your business, and running it. List them down and group them up.
2. Develop your knights towards the centre
Next is where THE REAL WORK is. Knights in the medieval ages fought battles and clear the path to victory. They did the hard work. And, real work is hard work. At this stage, you need to be able to draw up and see the total costs of setting up (or running) your business? like incorporation fees, inventories, equipment, marketing, and even payroll, taxes and insurance? and how much all that take from your revenue. Work with vendors you know on all of these (knights did work with informants to gather intel).
All of these different costs will then be budgeted accordingly. For example, you need to budget on operations (similar to doing a profit and loss statement) where you study your business’s projected revenue and the expenses associated with it such as inventories and marketing costs mentioned earlier. Besides that, you also need capital at some point of your business life cycle. So, you need to factor in assets, liabilities, and stakeholder’s equity in your budget (similar to doing a balance sheet). Payroll mentioned earlier means you need to factor in how much expenses to allocate to staffing including part-timers in your budget. Don’t forget cash flow? this is really important? where you need to estimate in your budget the ins and outs of your money for and from the business so that you always have enough cash for operating. Tedious, huh? That’s why you need knights to do this.
3. Develop your bishops
This next step is about WISDOM. You get these from bishops (a chess piece that moves diagonally). No matter how confident your knights are in their work, it pays to listen to your bishops. Knights are gallant but bishops are prudent and wise (yes, there had been bishops who were envious of the knights). So, regardless of how certain you are in your ability to generate revenues and maintain costs, it’s wise to factor in things like unexpected costs or rise in costs as well as unexpected drop in revenues and interruptions to your business (think COVID-19). What the bishops are trying to say here is that you should have more than enough money on standby before launching your business or taking it to the next level.
4. Make your king safe.
This next move is BUSINESS REVIEW. In chess, at a certain point of the game, you may want to basically make your king and rook (both yet to move) switch places so that your king is relatively safer from attacks (being away from the centre). In business, you do that by making a review of your business? the more frequent you do it, the better. Business can be very unpredictable that your projection of costs and revenues just two (2) weeks ago can prove to be a gross underestimation. So, it’s a king’s job?to be able to scan the business environment as frequently as necessary to make adjustments so that the business remains stable and unthreatened.
5. Develop your queen.
This move is basically SHOPPING? what queens are good at doing. No puns intended. Queens are good at giving the ‘kingdom’ a breath of fresh air. So, decide if some things need to change including suppliers. Spend more here and save more there. You can even do this when starting up the business and can definitely do it when you are doing your budgeting or reviewing the business (king and queen must have that mutual understanding, right?).
6. Connect your rooks.
This move is basically COST SAVINGS. Connecting the rooks in chess gives the rooks good flexibility and maximum control (no need to go into specifics). In business, flexibility and control come from cost-cutting measures. Super high costs can kill a business, but at times, businesses had no choice other than paying that crucial bill, or stepping up on marketing or investing in a once-in-a-lifetime opportunity. But, if you think hard enough, you could actually see that some other costs can be cut considerably and some purchases can wait until the next financial cycle. You can also look for suppliers with helpful payment terms to manage costs.
There you go. Simple guides to help you start budgeting for your business or add into your current business budgeting practices. But, if it all seems too complex still, don’t worry. AKPK is here to help. Get in contact with us for your business financial management needs: https://services.akpk.org.my/.
AKPK your financial partner.
Sources of reference: Investopedia, Quora