The one thing I’ve always wanted in every business I’ve run is predictable costs. For the most part we have been able to figure out what those are. Then, there are those times when we get a bill or expense out of the blue.
I bet you’ve had them, those strange expenses. You might even have thought that you were done with that expense, and then another one for the same amount shows up the next year. I bet you are saying to yourself that you hate those surprise expenses and can’t figure out why they keep coming back.
This has happened to me every year since I’ve been in business. And, every year I get annoyed by them just like you. I eventually figured out what those surprises were about.
The one thing I wanted in every business I’ve run is predictable cost. For the most part, we’ve been able to figure out what those are, then there are those times when we get a bill or an expense out of the blue that we never, never expected.
Now, I bet you’ve had them. Those strange expenses. You might even have thought that you were done with that expense and that would never come back again, and then another one appears in the same amount, in the next year. I bet you’re saying to yourself that you hate those surprise expenses, and can’t figure out why they keep coming back.
Now, this has happened to me every year since I’ve been in business. And every year I get annoyed by them, just like you. I eventually figured out what those surprises were about, so let’s jump right in and start some work on that.
Here are some things I want you to think about.
One, the world is full of surprises and your business is no different. You know, we call them black swan events, but the truth is black swan events really aren’t black swan events. They happen on a relatively predictable basis but it’s different every time. It might have the same theme, but it’s different every time.
Number two, you might not know what the surprise will be, but you’re gonna know the amount. So here’s how you figure that out.
You look back at your last few years in your profit and loss statement and say, “what was that number on my statement that was a surprise?”
And you’re gonna find that there’s a pattern at least how much a surprise of the expense is, if not what the expense might be.
You know, when I had my vending company, our surprise expense was always around $25,000 every year. And it changed every year, moved all over our profit and loss statement, and I never could figure out what it was, but finally after eight or nine years of this happening, when I said, “phew, that won’t happen. I can put that in the profit of our budget for next year.” I finally stopped that and I put $25,000 in our budget for miscellaneous expense. Now it’s about $5,000 a year. And guess what I do? I put in $5,000 in miscellaneous expense, and that gets allocated to that surprise thing that happens.
Now the truth is, I hate these expenses, I just really hate them, just like you do. But the truth is, they happen and for me to pretend they don’t happen and for you to pretend it doesn’t happen just makes no sense.
So, here’s what you can do about this issue.
- Number one, recognize that you’re going to have a mystery expense every year and do your best to understand this just the way it is.
- Number two, budget the dollar amount for the expense, and when it happens you’ll know you have the money available. If you don’t budget for it, and it could be a $25 or a $100,000 expense, because your company is that much bigger, well that might hurt a little bit, and it’s something that you don’t want to have. But if it’s on the budget, and you know the expense is gonna happen, you’ve got the money available. And, by the way, if the expense doesn’t come around, which never happens for me, it might for you, at least you have the money you can put back into your profit line.
- And number three, know that our world is unpredictable and expecting the unexpected will help you avoid frustration when you have these mystery expenses that come along.
So, if you do this, you might reduce the frustration you feel with the annual mystery expense. You’ll have more predictability, you won’t be frustrated, and can plan your cash needs better. You’ll move from being frustrated every year to understanding your mystery expenses and what they’re going to cost you.
Hey, this is Josh Patrick, you’re at the Sustainable Business, thanks a lot for stopping by. I hope to see you back here really soon.
Hey, and while you’re at it, why don’t you scroll down and leave a comment about what you think about mystery expenses? And you can then DOWNLOAD our Free eBook on Relationships & Roles. This e-book will figure out how you should spend your time and what your relationship should be with your business in the different roles that you have. So, I hope to see you back here really soon, and thanks a lot for stopping by.