As an entrepreneur, it’s important for you to come up with the right small business budgeting strategies that will make sure your company stays on point and profitable.
With all the time, effort, and capital that you pour into your business, the last thing you want to see happen is for it to face some kind of trouble; or even worse, failure due to financial mismanagement. The right budget and careful financial oversight applied to your business practices will enable you to paint a clear road map for where you want to be and how you’ll eventually get there.
Let’s take a look at some of the things you can do to plan your business budget and you’ll see how crucial a component it is to your company’s overall success.
Look at Your Fixed Expenses
The first expenses you should take a look at as part of your small business budgeting strategies are those that occur every month without fail and stay roughly the same each billing cycle. Think about common expenses like the rent for your office space, your payroll, and the taxes that you pay. These should be among the first things that you include in your budget, because you know you’ll always have to pay costs associated with them. After including them, you can work other expenses into your budget as part of your small business budgeting strategy. They can be shaped around your fixed expenses, so that there are fewer potential surprises.
Assuming that these costs remain fairly constant, you can plan for them several months at a time. That way, you’ll know what you will pay in the short term as well as what you’ll be paying for them in the long term.
Pick Out Costs That Can Dramatically Change From Month to Month
As part of your small business budgeting strategy, you also need to be aware of the costs that can change, depending on factors like how much business you do. Look at your inventory, how many deliveries you’ll have to take on every month, the cost of the materials you need to provide your products or services, and things of that nature. You don’t have as much control over these as you do your fixed costs and you should plan your company’s budget around that fact accordingly.
If a product or service that you offer corresponds with a particular time of the year more so than it does with others, then you’ll see an uptick in customers during that time. With that being the case, you need to consider challenges like increasing employee payroll to make sure you have enough coverage, taking on extra deliveries to make sure supply meets demand, and the possibility of extending the hours of your service.
Conversely, your business could be in an industry that experiences regular “slow” periods, such as construction in the winter months. When that happens, costs associated with running your business may be dramatically lower every month.
These are just some of the considerations that you have to keep in mind, and they certainly don’t apply to every business owner. However, showing some flexibility in your business budgeting strategy will guarantee that you’ll be prepared for sudden shifts in activity that could affect your company one way or the other.
Examine Time Tested Patterns and Trends
Research is an essential part of business planning and things are no different when it comes to figuring out a budget. One thing you may want to review is what other businesses in your area have experienced as far as traffic from customers and cash inflows/outflows are concerned. You can use past performance to guide your actions in setting up your own business budgeting strategy and further refine your expectations by considering where your company is located geographically. You can also consider the times that you operate compared to your competitors.
Using these methods, you’ll be able to estimate what you’ll see in revenue and plan subsequent actions related to your business accordingly.
It Pays to Stay On Top of Your Budget
Over time, you may experience instances where the costs that you worked into your business plan may not be ideal for the situation at hand. When that proves to be the case, you can make several adjustments to better suit the circumstances:
- Review your practices – With a small business, you can hardly afford to waste anything. If you find that money is being spent needlessly, then a review of your budget will allow you to make the adjustments necessary to guarantee that every dollar is put to good use.
Conversely, you may find out that you have a surplus that could be put to use in some area of the business that needs additional attention. Make it a habit to review your budget every month. Since the business climate changes rapidly, you may need to make periodic changes to ensure that you’ll always come out ahead.
- Keep business relationships strong – When running your company, the relationship that you share with other businesses can have a much larger influence on your small business budgeting strategies than you might think.
Whether we’re talking about suppliers who provide you with raw materials, or banks that extend loans to your company, you want to make sure that the terms you share with these entities are the best that they can be.
Doing so will ensure that you always have someone that you can rely on to deliver an important part of what keeps your company going.
- Look at ways to lower costs – This can be done in a number of ways. If you want some additional breathing room, then you can look at things like your office space and the equipment that you use.
Can you find a space that’s just as good for a small amount of money? Is there cheaper equipment out there that can do the job just as well as what you currently have?
Besides answering these simple questions, you shouldn’t be afraid to shop around for the suppliers who provide you with the raw materials that you need. Doing so could save enough revenue over the long term that you can redirect the money to more productive purposes.
When it comes down to it, your company needs concise budgeting in order to forecast its revenue streams and plan the appropriate steps to positive growth and longevity in your sector.
Regardless of what your company does, it helps to know where you’re going and how you’re going to get there. With these small business budgeting strategies, you can shape the kind of business plan that has helped countless companies like yours see success and become leaders in their fields.
Remember, running a business successfully does not need to be complicated. Keep it simple!
For more information on business analysis, business planning, and methods to grow your small business profitably, please check out our website.
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Manny Skevofilax is a consultant and speaker that assists his clients with successfully navigating the challenges of growing their businesses profitably. Since 2003, Manny helps businesses to enhance their financial results by using his experience in strategic planning, financial statement analysis, operations, and team-building. His consulting firm, PORTAL CFO Consulting, Inc., has attracted clients from diverse industries in the United States and abroad.
Manny can be reached at 410-808-3441 or via email at firstname.lastname@example.org.