The Closed Circle and the Business Owner part 2

The Closed Circle for business owners works very similar to a Closed Circle for Individuals. You should still use the same steps as you did to create your personal Closed Circle. However, the main difference is that you have to do a lot more forecasting as your business will grow.

Closed Circle for business owners must also be reviewed regularly and changed as the business goes through growth and changes.

The Closed Circle and the Business Owner part 1

Business owners should have a separate Closed Circle for their business. If there is more than one business, then each business should have its own Closed Circle. The exception to this is if you have a small home based business that is a sole proprietorship. At the beginning, there are probably not a lot of expenses, nor is there much income, so in this case, you could just include the small home based business in your personal Closed Circle until it grows to a point where the income is covering the expenses.

In Creating a Closed Circle for your business:

Obligations are Cost of Goods Sold

Necessities are Operating Expenses

Wants are expenses for growth and team enjoyment

Steps to creating a Closed Circle

These are the steps to creating a Closed Circle Budget:

1. Track your expenditures. You must track your expenses on a regular basis – daily, weekly, monthly, annually.
2. Total your expenditures. When starting your Closed Circle, it is good to have at least 3 months worth of expenditures so you can get an accurate picture of what you are spending monthly. Separate your obligations from your necessities.
3. Capture sources of income. It is important to know where your income is coming from and how much.
4. Determine your wants. Make a full list of your wants and if you are married, have your spouse do the same and agree on all wants.

Closed Circle Budget in depth

As I mentioned on my previous blog, the Closed Circle is broken down into Obligations, Necessities and Wants.

• Obligations are things that you are obligated to pay on a monthly basis, whether you are around or not.
• Necessities are things you need on a regular basis, however you would not have to pay for if you were away from home.
• Wants are material things that you want.

Being on a Closed Circle budget requires you to make a full list of all your obligations, necessities and wants. From there, you can get a very clear picture of where you are at and where you want to be in terms of your finances.