When it comes to starting up and maintaining a small business, there is no shortage of various things to stay on top of. This includes but isn’t limited to marketing, building a digital presence, getting involved in your community, developing a product, etc. Not only are all of these things on your to-do list, but you have to do them all while staying within your budget. But… you don’t have one yet. *Cue the nervous sweating*
Not to worry! While the idea of trying to create a budget with all of the other things on your plate is no doubt very daunting. That’s why we have created this guide of 4 quick and easy steps to develop your budget as a small business owner. 1. Identify all of your sources of income.
Whether you run a traditional street-side business or do a collection of various freelance gigs, go through and locate all of the sources of income that you receive. Then, go and set a bank account solely for that income. This will allow you to have a clear sense of your monthly total income while also keeping it all in one spot. 2. Classify your expenses.
Next step is to look at all of your expenses and put each into one of two categories: fixed or variable. Fixed expenses are those that remain the same each month; this includes rent, certain utilities, and sometimes payroll depending on your circumstances. To do this, review a previous monthly bank statement and locate each one of your expenses that is the same price each month. Add all of these expenses together to get your fixed monthly expenses! Now you do the same thing, but with your expenses that you have to pay each month but the exact amount changes. This may include payroll (again, depending on your circumstances), usage-based utilities, shipping costs, travel costs, etc. Go through and locate each of those expenses for your business and add up the total from each month. Do this for several months until you are able to make a more accurate financial prediction of what your variable spending will be each month. Then you eventually will be able to work them into a somewhat fixed budget as you grow accustomed to how they may fluctuate during certain months or with your business’s performance. (If you don’t have some of these expenses yet, then give your best projected estimate.) 3. Predict one-time spends.
Determine the things that you know you’ll have to spend on, but it’s a one time thing (or something that happens only a few times a year. This includes furniture, new devices, etc. Work those things into your budget so you know you’ll be able to afford them when the time comes. 4. Bring it all together!
Once you have completed these steps and determined all of your incomes and expenses, it’s time to bring it all together into one comprehensive view of your monthly spending. On your budget, you will want to add up your total income and your total expenses (your total fixed costs, variable expenses and one-time spends), then compare cash flow in (income) to cash flow out (expenses) to find your overall profitability. Once you have your budget made, you can use it as a reference in order to make sound financial decisions, find places to cut spending/grow revenue, and be able to land funding for your business. Go ahead — you got this!