Based on a popular column by Marlin Steel President Drew Greenblatt on Inc.com
1. Craft a well-conceived list of assumptions. Spend most of your time here. This is where the heavy thinking happens.
2. Lay these assumptions into three scenarios: a bad year, a good year and a great year.
3. In building your budget, use the conservative scenario. It’s obvious why. You have to make sure that you can handle surprises.
4. When you’re done with your plan, go back and reduce the revenues by 10%. And the increase the costs by 10%. This was probably some of the best advice I ever received. You’re going to face surprises along the way.
5. Create a balance sheet: an income statement and a cash-flow statement. Some small businesses wrongly forgo this exercise, assuming they’re too tiny to bother. They shouldn’t suppose that.
6. Review your assessments with your accountant and your trusted mentors.