Ready to start a business? Are you set to take on the challenge of being a business owner? It is not easy to implement startup business ideas. The good news, though, is that there are methods that you can take to make your efforts easier. Creating a budget, for instance, can significantly help you keep your business on track. It is such a simple financial record, but it serves a critical role in the foundations of a business. In this article, we are going to talk about how to create a budget for starting a business. We will be also sharing tips on how to continue budgeting as your business progress.
Set a Target Budget
The first step that you should do when starting a business is determine your ideal spending limit. This will be your target budget. Be realistic. You don’t want to spend way beyond your means and reach into your personal savings.
Choose Your Preferred Budgeting Method
There are different ways to keep track of your budget. Some prefer to go analog, keeping everything handwritten in a journal or notebook. This is great for those who find writing things down helpful, especially in committing them to memory. On the other hand, others prefer a digital method, selecting among the numerous finance applications out there that you can download via App Store or Google Play Store. You can also use a spreadsheet program as your budget tracker. We recommend Google Sheets because it is accessible anywhere as long as you have a reliable internet connection.
List Down All Your Startup Needs and Wants
Get a piece of paper and list down all your projected expenses. Startup costs can be classified into two major categories: assets and expenses. Startup assets are one-time purchases of both liquid and non-liquid assets. This type of cost includes property, equipment, vehicles, inventory, and more. These expenses are not tax-deductible. Meanwhile, startup expenses are rolling expenses that can typically renew every month. They can either be fixed or variable. This type of cost includes utilities and payroll一costs that you will need to cover not just before the opening but every month after that. Finally, don’t forget to list down all your wants. Ask yourself this: in an ideal world where you have an unlimited budget what do you want for your business?
Prioritize and Prune
Now, grab another piece of paper. Take a look at your list again. This time around, we want you to rearrange them according to your priority. Start with the things that are critical for your business to launch. This includes permits, website fees, and inventory. Go through each item after you’re done and place a projected cost for each of them. Next, compare the sum of your projection with your ideal budget. Don’t forget to add a buffer to account for unexpected expenses and price adjustments. Feel free to cut back your list to meet your spending limit starting from the bottom up. This ensures that all your needs are covered.
Here’s a pro tip: You don’t always have to buy everything brand new. For instance, suppose you need a couch for your reception area. Are there any friends and family you can borrow from? How about getting a secondhand piece? There are two keys to staying within your budget while still accommodating your wants. These are frugality and creativity.
Calculate and Compare
The next step is to highlight all your startup expenses. As mentioned, these are the costs that you’d have to pay each month. Fixed costs include rent, payroll, and web hosting. On the other hand, variable costs include shipping costs, raw materials, and transportation. Then, calculate your projected income per month and compare the two amounts. Your income should ideally be significantly more than your expenses. Again, this is a good opportunity to check if there are any expenses that you can further cut back.
Here’s a pro tip: You can further cut back your monthly expenses by opting for an annual payment term. While it might prove to be quite an investment upfront, it will certainly save you more money in the long run.
Review and Adjust
Encode all your items into your preferred budgeting tracker and review each item as you go. Are there any other expenses that you can further reduce or remove? Here’s the deal: there is no such thing as a perfect budget. Budgeting is a process that will require constant reviews and adjustments. Don’t be afraid to make any changes whenever necessary. Is one app not working for you? Then go ahead and try another one. Switch your spreadsheet templates. Create more spending categories. What’s important is for your budget to work for you and not the other way around. Doing so will make it easier for you to stick to your financial plan more diligently…and isn’t that what budgeting is really about? Good luck!