Today we wanted to discuss creating a budget for your small business. If you are in business, there is no way you can avoid budgeting if you want to properly run your business.
You are entering the business world at a time when the recent economic downturn has made life extremely difficult for nearly everyone in the country. You shouldn’t despair, however. America has always – and continues to – look kindly on the small business owner. To ensure your success, however, you must be able to budget. Follow these tips for creating a budget for your small business.
What kind of timeline does your budget follow? Will it be monthly, quarterly, or yearly? Usually, small businesses follow shorter time periods and must also be more flexible.
Determining Income When Budgeting
How much profit do you think your business will make? Depending on the timeline you established, estimate how much money you think you’ll make. Underestimate for wiggle room. Once you have some ideas, create a spreadsheet to begin building your budget. Consider the rate at which your business may grow. If your revenue increases over time, how will that effect this and future budgets? If you’re not sure how to answer these questions at first, do some research. Once you’ve established your budget, be sure to revisit your projected income amount with the actual number.
Determining Expenses When Budgeting
What are your necessary expenditures? What is your overhead, how much will your inventory cost, and what is your estimated payroll? Overhead includes things like phone and electricity bills, the cost of internet, and your rent. Once again, overestimate. Research if you’re not sure. Talk to other small business owners. Look at typical costs and the way that sales trends fluctuate.
Figure in an estimate of what you made need to set aside in case of emergency. A conservative budget will allow you a small savings account which you can add to as your business grows and develops and you find ways to cut corners or places where you overestimated where you would need to place funding.
Flexibility In Budgeting
The reason you created a budget is to follow it but allow yourself some room to move around or to grow. Particularly if this is your first venture into the world of self-employment, remind yourself that you are learning as you go. Over time you can tweak your budget by re-assessing your income, expenditures, what you’ve spend in case of emergencies, and ways to cut your costs like supplies, travel, expense accounts, or business lunches. Your increased experience will tell you when you should or shouldn’t underestimate or overestimate.
Once you have initiated your budget, continue to revisit it to make sure that all your calculations line up. Don’t be afraid to ask someone else to look it over for you or to check your work, particularly someone else in the same business as you or someone who may possess more financial knowledge. When creating your budget, be conservative enough to give you the room to maneuver so you need not rely too often on your business credit card. Utilizing experiential marketing companies and field marketing companies will give you some idea of what you need to enter the business world.