Budget Planning for Your Small Business
Creating a budget for your small business is essential to the success of your organization. As a new or existing business owner, you’ll need to consider several things, for instance, what you need to begin, what you will need to set aside, and what to expect as your business takes off. A budget will estimate both revenue and expenses and is ultimately a tool that will help you manage your business’s future as best you can.
Business budgeting, however, will not come without its challenges. Without the past to reference, the budget for your small business won’t be perfect; still, there are ways to ensure that your plan is easy to follow and that the general overview is as relevant as possible.
Know Your Business Costs & Expenses
To begin, consider the different kinds of costs that your business incurs. There are variable costs, semi-fixed costs, and fixed costs to consider. Variable costs change based on production, semi-fixed costs are things that can be altered due to specific circumstances, such as marketing or advertising, and fixed costs are things that aren’t typically subject to change, like salaries, utilities, rent, or insurance. Having a good grasp on how these costs differ and understanding which ones can be altered to fit the direction of your business is an important part of your budget.
Also, keep in mind additional small expenses or “investments” that might occur just once a year such as, holiday gifts for key customers, equipment or computer purchases. It’s always good to have a plan for these from the beginning.
Plan for the Unexpected Expense
In addition to understanding the costs your business will have, it’s important to remember to overestimate within your budget. As with most things in life, the unexpected sometimes happens. It’s better to have factored in the extra cost of a project or to be prepared for a change in employees than to be taken by surprise. Moreover, you have to do your research, such as staying on top of sales trends and forecasts within your area of business to ensure that your budget stays appropriately aligned with your business’s trajectory. To make the most out of your budget plan you should refer to it frequently, assessing and changing things as needed. You will learn a lot through your budget, including how to reevaluate it as costs fluctuate.
Identify & Forecast Sources of Income
All this talk about expenses can take away from the excitement of entrepreneurship. You are doing this because of your passion and to support yourself, your family and your dreams. Look at different income sources and things that make you money on a monthly basis. Is revenue generated through regular/repeat customers, or is each month more variable? Also, keep in mind that certain promotions are held a few times a year, which may mean forecasting more income during those months. Income may also include business loans or GROW microloans, product sales, services provided and more.
Write It Down
At the end of the day, the budget that you create for your business is there to make sure that you have enough money to keep the business going, to keep up with competitors, and to continue to grow and expand. By analyzing costs, being flexible with your budgetary details, and preparing properly for the future, your business’s budget will help you and your organization thrive.
Review It Monthly
Things change, which is one of the joys of entrepreneurship. Perhaps you identify a huge opportunity with a new product or a new sales channel. Perhaps your goal is to grow from home-based online sales to a retail store front. This will impact your budget and your timeline. Plan for it, monitor it, adjust it. Don’t be afraid to set goals and strive for increases in sales, too.
Keeping good records will give you important data to review as your business changes. Imagine being in year one or two and looking back at sales or expenses for the same month the year before. This may spur reminders for certain promotions or opportunities to increase sales you may have forgotten.
Resources & Training Options
It doesn’t have to be overly complex. There are many great tools that allow you to input information to generate the budget spreadsheet. We teach a QuickBooks for business class 4 times a year. We also have our Small Business GPS “Business Basics” and “Financial Awareness” classes that offer many different insights and aspects of budgeting for your business. Feel free to visit our calendar or sign up for our email list to ensure you get all event notifications and resources delivered to your inbox.
Sources & Templates