How to Effectively Budget for Your Small Business
Congratulations! You have either started or taken over a small business, not a simple task in its own right.
Now what? You want to ensure the future success of your new endeavor, and one of the key components is a well thought out and complete budget.
Why is a budget so important?
A good budget will you give you an accurate snapshot of where your business is. This allows you to make smart, educated decisions on things like growth, expansion, and will eliminate the risk of overspending or not spending enough to for your business to compete.
Here are some tips when you are forming your budget:
Know your industry
Of course, no two businesses are alike, but there are similarities among businesses in the same industry. Do some research on recent industry trends, see where the industry has been, and where it might be going. Network with other local business owners similar to you and check the IRS website for the percentage of review that will likely go toward cost groupings.
Document everything in an organized manner
While this may seem a bit obvious, staying organized will help ensure a lack of mistakes which can be more costly than you might think. Using spreadsheets can not only give you an accurate reflection of the information you need, but used correctly they can be extremely powerful with their vast formulae and other business tools.
Give yourself some padding
Football players wear pads to give themselves some padding between themselves, and the monstrous linebacker that is looking to put them out of business. As a business owner, apply this strategy and give yourself some breathing room on the numbers.
This is in case your estimated revenue isn’t as much or something else happens, it won’t end up killing your business. And while it still hurt you a little bit, at least you will be able to get up and walk off the field only to try again.
Cut costs where you can
While we are not saying that you should come into your business and immediately lay people off or slash benefits, you should see if any cuts are possible. This will help you make sure your bills are all paid on time, or possibly allow you to give yourself some advertising exposure.
Another tip is to wait to make purchases at the start of a new billing cycle. A little bit here, a little bit there, these will add up and help set yourself up for some healthy growth.
Don’t put it in a drawer and forget about it
While budgets are usually created at the beginning of the year, or possibly quarter, don’t wait until it’s time for a new one before you look at your current one. Be sure to check your budget throughout the current cycle. This will help avoid any surprises if unexpected expenses come up, you’ll also be more aware of your financial situation and have an easier time adjusting your accounting accordingly.
Go bargain hunting
Like any good buyer in any situation, shopping around will save you money in the end. Sure, it takes time up front but you will be able to save more money over a longer period of time. Shop around and find sellers at a price that makes sense for where your business is at in its growth.
Starting or taking over a business is no easy task. With so many moving parts in a business asking for help is very standard in the industry. The experts at Boxelder Consulting are ready to assist you with any questions or struggles you and your business might have. Contact us today and we will get you set up with a business plan that not only works but makes sense to you.