Did you know that most small businesses are sole proprietorships?
Aside from non-employer businesses, sole proprietorships make up around 73.2% of all the small business in the United States. It sometimes gets difficult to get your finances in order if you’re the only one managing your expenses.
If you want to know how to prepare a budget, read on. We offer you five ways to budget your money that can help your small business stay afloat. You can also subscribe to our content if you don’t want to miss any of our posts like this!
1. Research the Costs
First and foremost, what you need to do to set up your budget is to research costs. You need to do this to prevent your business from getting unexpected expenses. After all, costs you didn’t expect set your business off-track and hinder you from achieving your set goals.
If your budget has a specifically associated cost and later find out that you need more money, your income gets reduced. It puts your establishment in a bad position.
You need to think about the fixed and variable costs that affect your business budget. The former includes your rent and utilities while the latter depends on the price of goods and labor costs.
Not sure where to start?
There are new technology tools you can turn to when it comes to researching and estimating costs. A few great tools include Omnia Pricewatch, DataPlay, and QuestionPro.
2. Estimate the Revenues
If you want to know the secret in creating a budget, you need to calculate the amount of money you earn from sales within a certain timeframe. A lot of businesses fail due to the fact that they don’t calculate their revenue. This leads them to give overestimations that can make them spend more than what their actual revenue can handle.
You need to learn how to forecast your revenue to have a goal that you can share with your business team. Make sure that these estimates are conservative and realistic.
Don’t create projections based on your business goals. Base it on real data since you can’t expect to have that revenue without having a system established to support it. Ensure that you base your projections on what your business is capable of.
One great way to achieve this is to utilize an online budgeting tool. You can also use online software to estimate costs and profits, keep track of bookkeeping processes, and forecast long-term financial goals. Some tools for budgeting and forecasting include Adaptive Insights, Plan Guru, and IBM Planning Analytics.
3. Adjust the Budget for Economic Trends
Your business gets affected by the economic and industrial trends. Right now, the American economy is on a firm footing at 2.6% growth in the final quarter of last year. It’s projected that it will grow more as this year progresses.
When you prepare your business for the possible changes in trends, you have the power to continue operation without major problems. It allows you to adapt your service price and operation scale based on how these happenings affect your business. If the country’s economic situation faces a crisis, you know you need to reduce your prices and expect that some customers will stop coming.
Otherwise, industry growth will force you to spend more. This ensures that you remain relevant and keep up with the growing demands of the industry. Prepare for this by considering the general growth rate of your industry and consult reliable experts about the growth of the economy.
4. Decide the Way You Spend
Your decision on how to spend money is a major way of determining how your business maintains its budget.
Spending money on frivolous pursuits means you’re wasting money you could have spent in better endeavors. For instance, investing huge amounts of money on office furniture won’t bring more revenue to your business and can waste money.
Make fruitful use of your money by spending it on things like expanding your marketing campaign. It helps you create more leads that give your business more revenue in the years to come.
With this, it becomes important for you to learn the type of spending you need for your business to last in the long-run.
You need to decide whether you’ll buy or lease business implements like technology and buildings. This changes how your budgeting strategy works. On one hand, buying them makes these free from monthly fees but has a larger upfront cost compared to leasing it.
Regardless of what you choose, your intent should be to accommodate your business financial situation.
5. Consult Technology Experts
Today’s small businesses no longer rely solely on brick-and-mortar strategies. You should also consult technology professionals when setting up a budget.
As mentioned above, you’ll want to use newer tools like budgeting and forecasting software. You’ll want to use online tools to help estimate costs and research the viability of your business model in relation to your target audience.
The question here is: do you know how to use these tools?
It’s likely you know how to present your product. You’re the expert in that field. However, there’s a lower chance you and your staff know how to use all these new software to maximize their efficiency and get reliable results.
This is why you should hire the experts instead. They can use these tools for you and present you the final data. Not only is this faster and cheaper, it also guarantees you get accurate budgeting data too.
Learn How to Prepare a Budget Today!
Small businesses need more effort to stay afloat compared to their multimillion business counterparts. It’s a harsh reality but it doesn’t mean that you need to fight with tooth and nail to keep your business intact. Use the following tips to your advantage since it allows you to adjust your budget based on the most common occurrences in the industry that would otherwise catch your business off-guard.
Do you need to know how to prepare a budget? Never hesitate to contact us. We have the right set of expertise and knowledge that can help your business grow more.