If you’re one of the 600,000 people in America just starting your small business this year, there are a lot of topics to cover to make sure things sail as smoothly as possible. One of the things you need to know to stay out of trouble financially is how to set a budget for your small business.
Failing to plan properly when it comes to finances can be the downfall of your business. Continue reading and I’ll help you steer clear of common challenges by showing you a simple way to set a budget for your small business.
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1. Figure Out Costs That are Absolutely Essential
There are some things you can’t live without in your business. If you sell a physical product at a brick and mortar store then you need to have products on hand, for instance. Understanding what’s essential and what would be “nice to have” is key in this part of the process.
Once you’ve written down those essential numbers, you can head on to step two because those numbers might not be the final numbers after all.
2. Negotiate with Everyone
If you pay money to someone regularly, see if you can get a better rate. Maybe you purchase more of a product or service to get a better price on it. Maybe you change providers and get a better deal for switching to another company.
If you haven’t looked at other providers lately, you might be overpaying. This is especially true if you aren’t 100% satisfied with the product or service the company provided to you.
3. Figure Out How Much Money Your Business Will Bring In
I have to say that I really hate trying to figure out how much money my business will bring in. I’m not a numbers girl but whatever. I do what I have to do so I know that my business will be successful. If you absolutely hate it then you could always speak with a professional and let them help you.
What you might find is that you may be running thin on cash flow because of the many bills your business owes. If your business has a lot of debts, you might consider debt consolidation. If you don’t understand debt consolidation, you can see more here as well as learn more about budgeting.
Without knowing your numbers, it’s impossible to grow your numbers. Taking the time out to at least get an idea of how much revenue will come into the company will make your life so much easier.
4. Don’t Overestimate Your Success
It’s great to have a positive attitude, but it’s better to underestimate your success. When you think there is going to be a lot of money coming into your business, you’re more likely to increase your spending. Even if you are very successful, try not to go overboard with unnecessary spending.
Figure out a conservative number and set your spending goals off that number. Not the number you came up with in step number three. That number is likely to be much higher than what’s realistic.
5. Work with a Bookkeeper
It’s hard enough to run your own business without having to do the bookkeeping. Learning how to do it is a good idea in case you’re stuck in a pickle. However, you probably don’t want to do it for longer than you have to do it.
Having someone to take care of the books likely means they’ll be fewer errors. They may even see some places where you can save some money. That might be with supplies, taxes, or other things.
6. Prepare for the Unexpected
After figuring out your fixed and variable expenses, you should set aside an emergency fund for your business. It doesn’t have to be wild. Think of the most expensive problem you might encounter. That might be how much money you want to keep aside in case there are any troubles. I’m not a professional and this isn’t financial advice. I’m just saying that it’s better to be safe than sorry.
Now that you’ve got all that down, you have your budget. You can put it on paper or you can use software to track everything. It’s all about what you’ll actually do.
