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Budgeting For Your Business: The Basics

When it comes to starting up your own business there are a few things you are going to need to think about. Running a business is a pretty complicated thing and requires you to spend a lot of time preparing, thinking and budgeting to make it all work.

In your business you are going to need an office space work from, computer systems to support your work, it support in case you have issues, a finance department, marketing, sales… the list goes on. However the first step to creating all of this is setting yourself a budget for your business and being able to stick to it.

How to make a budget

Before we get into the business aspect of budgeting we need to know what a budget is and how you can make one for your business. A budget is a way that we set aside money for different aspects of life, or business. To understand how to make an effective budget for your business you must first learn how to make one for your personal expenses.

To make a personal budget for you home you will first need to calculate how much money you make every month plus how much money you pay out every month. Start by going through your bank statements from the last three months and write down everything you spent throughout the month and the total money you made as income. Once you look at this you will be able to see whether you are spending more money than you make every month.

Once you have your total incoming and outgoing values we need to split the outgoing into categories: essential, luxury and lifestyle. Your essential spending will be any bills such as your mortgage or rent, your health insurance and anything similar. Luxury is your phone bill, car payments etc, and lifestyle is food and entertainment. You should be splitting your costs so that 50% is on the essentials and the rest is divided between the other two.

Reducing costs

If you are spending too much money in any of these areas you can try to reduce your costs in several different ways. We are going to look at this for each type of outgoing:

Essential: this is the hardest type of payment to reduce, however it can be done if you try hard enough. If you are finding that your mortgage or rent is far too high you can in fact lower the cost of this by remortgaging your home or moving somewhere new. You can even lengthen the term of your contract to reduce the cost. For bills you can always look online to find new energy providers and try to get a better package for less money for your home.

Luxury: phone and car costs are pretty simple to reduce, all you need to do is either change the policy you are on or switch your device or vehicle. It is simple and can save you a lot of money in the long term.

Lifestyle: food bills can be lowered by shopping savvy and making big batches of meals to go in the freezer for a later date. You can rescue other coats by simply avoiding going out to expensive places and stopping yourself from shipping online.

Now you know the basics on making a budget for your home, you can look to apply this to your business.

Check Industry Standards
It is important to remember that that  it every business is created equally so what you may think works for one industry won’t necessarily work the same way for yours. It is important when you start off with your business that you go online and do the research so that you can understand exactly what is required for your specific line of work. You may end up finding a few useful facts which will help you to budget for every aspect of the business. It might even be useful to try and talk to someone who works in the industry already to get their opinion on everything and saw what they think about it all. You may end up with some useful tips which you can take with you as you plan your business.

Use Spreadsheets

The best tool you can possibly have when tallying up all of the different things you need to buy for the business and what you total budget is , is a spreadsheet. This way you can plug everything into one pale and see what you need, what you have already bought and how much you have spent. This will allow you to canned values for the rest of the business and adjust anything as you go along so that to don’t overspend.

Be Flexible

As with any large project you will do in your lifetime, it is crucial that you leave yourself some room when it comes to the budget. You will likely already have a general idea on what you want to spend. But be aware that things may happen that cause you to spend more and this might blow your original budget by. Small margin. The best thing you can do is set your budget less than what you have and then if things happen it’s fine.

Cut Costs
If you ever face a tough situation during those first crucial months of owning a business you need to learn how you can cut your costs and draw in more custom to get you back on top of your game. In times like these the first thing you need to do is work out where you have money which isn’t being spent properly. A lot of the time this will be in advertising and you can cut the costs by working on social media for free for a while as you get back on top. This will give you the time to make some money back but also social media can bring mor people in to your business.

Review And Revise

When you first make the budget for your business it will likely include the basics but not much else. As you progress and the business get more and more popular you will need to regularly update your budget to accommodate for any new products or services that your provide to your customers. Your budget will likely increase too so it will be the perfect opportunity to hire an extra member of staff or use the budget for a big campaign.

Shop For Suppliers

When you are running a business it is always important to try and get the best deals you can on the materials and equipment you may need to do your job and create your products.  Make sure you really take the time to research and shop around for the best deal you can because this will make a big difference to the overall profit margin you are able to make for each sale.

Quality Over Quantity

It is incredibly tempting when you first start to grow as a business owner to hire a massive team to work for you at a low rate. Although this might sound like a good idea, it is better to hire a few people who are exceptional at their jobs and passionate about the business. It is much better for you as a business to grow a close knit and loyal team than have an army of strangers working for your cause. This will save you money and help you make more in the long run.