What is going to happen in 2010?  After the topsy turvy ride we’ve all been on for the last 18 months everyone wants to know what’s going to happen next year, and the truth is, it’s anybody’s guess. This uncertainty and risk can be very unsettling for a business owner.  But there is something that we can do about it.  Create a budget.

OK, some of you just spit your coffee at the screen as you laughed out loud, but I’m not kidding.  A budget is a tool that you can use to hold meaningful discussions with your team about what the next year could look like.  I’m not talking about a budget where we take last year’s numbers and say, “We’re going to grow 20%” and scale everything up and move on, no I’m talking about a bottom up budget, starting with each line on the income statement, and identifying what we are going to do differently next year that is going to change this number.  Then creating a plan that reflects those changes and showing everyone how succeeding or failing at these initiatives affects the results.

That’s right I said “we”. It’s crucial that you have this discussion with your whole management team, your key leaders who can move the needle for the business.  As a team, you need to have shared assumptions, agreeing together what the most likely scenario is for next year, and what options do you have if that scenario doesn’t occur.  They need to know how their efforts can change the results for the company, how they can save a little on expenses and keep the company in the black, how 2 additional customers can drive substantial improvements to the bottom line.  That kind of stuff.

Yes, it may mean that you have to have a discussion about why the owner gets to keep the profits; but that’s a healthy conversation to have.  It might lead you to want to create a performance based compensation plan; good, that’s a step in the right direction.  It also may mean talking about what happens if we lose money next year; which is also a healthy discussion to have.

You are in the lifeboat with these people; you hired them because they are smart, and effective.  Use the budgeting process to engage the best ideas from the whole team to deal with the uncertainty and risk that you are facing.  It will make you feel a lot better, and you may gain some new insights and ideas that could make a big difference.

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Brad Farris is a small business advisor with Anchor Advisors, Ltd. in Chicago, Il. Since 2001 Anchor Advisors has been helping creative professional firms to grow, by helping them clarify their purpose, get the most from their people, keep their eye on key performance measures, and implement consistent processes. Brad is also the author of The Business Owner’s Champion: 6 Practices to Build your Nerve and your Business.