The key to crafting an accurate budget for your business is to know where all of your money is going. Whether it's coming in as revenue or going out the door one bill at a time, keeping track of every dollar is important for figuring out the resources you have available to work with should any problems arise or upgrades become necessary.
Five Costs to Include in Your Budget
Here are a few of the typical costs small businesses need to take into account when formulating their budgets:
- Expert Knowledge. Depending on what industry you’re in, you may need professional help getting things started. While some specialists charge a fee, the cost of delving into an unknown market could come with an even bigger price.
- Personnel to do the Job. Unless a startup is run single-handedly by the owner, new businesses will need some help in operations and services. Choosing the right team is essential for a company to realize its goals. Employees are generally at the front lines, interacting with customers and clients on a daily basis. Sometimes getting the correct help comes with a larger salary, but it may be worth it to acquire the right people to help build up a brand's reputation and loyalty.
- The Fees of Doing Business. Depending on what industry you’re entering, there may be fees or licenses you need even before you open the doors. It’s important to identify these costs early on and make note of any necessary renewals to prevent anything from being overlooked. Other fees to consider are storefront, equipment or employees insurance, which are often monthly expenses.
- Necessary Equipment. Every business needs the proper tools to complete their mission, no matter what the goal is. Tools can include anything from phones for contacting clients to shopping bags for retail stores. Also consider the quality of the equipment you're buying to estimate when you'll need to replace it in the future.
- Brand Exposure. When starting out, it can sometimes be a struggle to get your name out in front of the public. If you are considering advertising to increase brand awareness, you should review which platforms you plan to use and calculate their costs. With “free” advertising avenues, such as social media, some companies can get exposure for little or no cost, but anyone thinking about web ads, SEO, print or television needs to plan this in the budget.
The Importance of Budgeting
It is important for your financial planning to work hand in hand with your business goals.
Wasteful spending can leave you coming up short in the areas needed to thrive, making it difficult to allocate money when you really need it.
Once you understand the financial course you need to take, it will help you achieve your business goals and easily put aside the resources needed to achieve those goals.
As the foundation for fiscal planning begins to take form, additional information, such as cost and revenue predictions could be applied to the plan to compensate for any adjustments or shortcomings.
Once your budget has been agreed, it is important to make sure that it is remaining on track. There should be consistent oversight by you, the owner, or a reliable team member. By scheduling monthly budget meetings with your team, you can monitor how far you're straying from the intended paths and goals or if you're keeping pace with expectations.
These moments of reflection can help you review your goals and set new objectives moving forward.