Despite the fact that your small business is performing decently in the market, you still have too meager a profit to show, largely due to your expenses. This is where all the money is going and this is where you have to pull the plug. Sometimes, even pulling the plug doesn’t do the job, and in such scenarios, businesses end up requiring loans, including short-term business loans.
There were around 60% of newly launched brands that hardly grew their small businesses to five years in 2018 alone? Do you know what they all lacked despite perseverance and the ambition to grow? Well, to be honest, a business budget. There was no check and balance of their funding, and hence, no evaluation of performance or improvement of skills.
First of all, you need a pat on the back for dissolving the market’s saturation with your brand’s topnotch services. But perhaps it’s time you sit down with your accounts department and share some insight on what you detest the most – budgeting – yes, too unkempt of us.
According to Donna Conte of Warren Averett, a budget helps propel your business to higher levels of growth because you’re not only keeping your expenses organized, but also evaluating your performance as you grow.
Planning a budget for your small business might give you the ‘shivers’ and ‘shudders’, but someone’s gotta do it, and you can’t keep putting everything off for tomorrow. Your brand requires a simple business budget so that you can tally your monthly earnings with your cash flow and decide how to balance both.
Take it from the people who didn’t have a penny to their name for the first couple of months of their new business, and go through our simple step-by-step business budgeting guide below.
First things first – plan your business budget by narrowing down your complete income resources so that you can compare them the next time you need to invest. Your income resources will also include the earnings from the hourly or monthly product sales of your brand that may be further categorized into the savings you have in your bank account.
Add any (or all) loans that you’ve applied for funding the one-time or fixed expenses of your business into the checklist.
For a start-up to be successful, you cannot be a one-man show – this means you must have employees under the roof of your workspace with fixed salaries to pay every month. Not only that, if you’re working from the comfort of your home or a purchased office, you might have to pay a mortgage or rent in case of a shared workspace.
With utilities and expenses to pay every month, there must be a few that are always fixed. For instance, take the allowances spent in hosting the internet, website, phone lines, electricity and other utilities, accounting services, legal fees, government taxes and insurance which are fixed and warrant a specific checklist as per your expenses.
It’s crucial to pitch your start-up from rock bottom to the top, but we are not asking you to count your earnings or tally your profits with your investment at the time when you actually make it. Once your profits increase – even if you have to show only a meager 5% than last time – you can use the additional funds for climbing the growth ladder faster.
Such variable costs include the expenses you’re using to finance your advertising or marketing strategies, print services, raw materials, contractor wages, and even commissions. Also, you might up your work travel game once in a while, and take your employees to an overseas conference or treat yourself to a vacation with the leftover fundings!
Given that you cannot work in an empty workspace, you might need to spend on equipment and software that might put a big burden on your bank account but are highly necessary. To make your workspace livable and hence, workable, you’d need to spend on furniture, computers, software, and office supplies, but gladly, you can include them in the checklist for your one-time expenses.
Once you’ve created specific checklists for all the four costs mentioned above, you need to pull them together and create a business budget that you can refer to every month. You can make a separate budget for your annual or half-yearly costs so that you can compare the total and improvise when needed.
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