Simplifying Your Business Budget
Well, we’re officially through the first month of the year. Still haven’t put a business budget in place this year? It’s not too late.
When you’re busy running the day-to-day tasks and responsibilities of a business, adding one more system can seem overwhelming - and I’m here to tell you, you’re not alone if the financials feel big and scary. This time of year, business owners are faced with taxes, marketing plans, and setting goals for how you want your business to grow the coming year (yes, even in February, it’s still new). However, the financial part of your business is likely one of the main, if not the main goal of running your business, correct?
If you’re relating to what I’m saying, and feel shame or fear about not having a budget in place, I want you to go ahead and let that go. It’s not too late to start one for this year. Putting a simple system in place will allow you to be and feel much more in control of the financial health of your business. Take a deep breath and get started with these 6 steps. You can do this!
1. Set aside a time to go over your financials and put together your budget. This takes some concentration, so make sure you dedicate and schedule some time to get it done.
2. If you haven’t yet, completely separate your business finances from your personal finances.
3. Open a bank account for the needs of your business. At minimum, you should have accounts or reserves for:
Revenue: all incoming funds
Taxes: 30 percent is recommended
Savings: expected and unexpected expenses that arise
4. Determine your expected income. Where is your income coming from and how much is coming in? If your income isn’t consistent, add up your expected yearly income and divide it by 12 to determine your monthly average.
5. Determine all current operating expenses (i.e., rent, payroll - including yourself, loan payments, taxes).
6. Create a profit and loss statement. Add up all income, and subtract expenses.
Once you’ve made it this far, you know what you’re working with! If you’re in the green (making a profit), great! If not, that’s okay too! With this information, you can now determine what, if anything, you need to change. See? Once you break it down into small steps, it’s not nearly as big, scary, or overwhelming. Plus, having this information will leave you feeling far more in control and confident in running your business.
Now that you’ve established a firm grasp on the financial health of your business, and where you need to make changes, if any, you can determine a budget for things that will help you move forward and grow in your business! Here are some smart ways to put your money where the growth is:
1. Be sure you’re paying yourself adequately. This might sound obvious, but your profits need to go to you first (after your necessary expenses, of course).
2. Save wisely. Life happens… setbacks, equipment breakdown, income loss, etc. There are bound to be expenses that come up, so be sure you’re prepared for them. However, and this is a big one… saving all your profits will not move your business forward. Don’t be afraid to invest in your business.
3. When determining your discretionary expenses, make room for the things that will move your business forward:
Marketing: media exposure, advertising, target audience research, tools to get your message out there and create brand awareness.
Professional Development & Education: Coaching, adding to your skillset,
Brand Strategy: is your brand speaking to your ideal client? Is your offer and message being conveyed clearly? This is often something that is overlooked and shouldn’t be.
Outsourcing: Time is your most valuable asset, and also, we all have things we’re just not great at. Outsourcing tasks and projects that are either, a. outside of your skillset, or b. not the most valuable way to spend your time, is a smart investment into your business.
Keep in mind, your budget is fluid, and not set in stone. Its purpose is to keep you informed of the financial health of your business. Things can be tweaked, changed, and moved around as necessary, and as your business grows and changes. Ideally, you will reevaluate quarterly or biannually, but at least once per year.
Lucie Mitchell, CTNC & CTLC
Lucie Mitchell & Company
Follow me here
Stay up to date with my latest! Simply type FAB to 254-457-5533!
Check out my latest Podcast Episode!