With everything 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.When it comes to your business, you already know everything that there is to know about the product and service that you offer, right?
No matter what kind of question a business partner, customer, supplier, or lender has about what your company does and how it can improve lives, you’ll be able to answer their questions without a second thought.
Some of those same people who ask you questions about what it is that your company does may have questions about your company’s finances and expenditures too.
With the right budget and careful financial oversight applied to your business practices, you’ll not only be able to answer those questions, but you’ll be painting a clear roadmap for where you want to be and how you’ll eventually get there.
Let’s take a look at 4 Small Business Budgeting Strategies and you’ll see how crucial a component it is to your company’s overall success.
1. 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 operating 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 strategies. 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 so that you’ll know what you pay immediately as well as what you’ll be paying for them in the long term.
2. Pick Out Costs That Can Dramatically Change From Month to Month
As part of your small business budgeting strategies, you also need to be aware of the costs that can change depending on factors like how much business you do.
- 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
- Similar 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. But here are some ways to reduce operating expenses in your business.
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 inevitabilities 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, but showing some flexibility in your small business budgeting strategies will guarantee that you’ll be prepared for sudden shifts in activity that could affect your company one way or the other.
3. 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 do is take a look at information like what other businesses in your area have experienced as far as traffic from customers and money coming in are concerned.
You can use past precedents to guide your actions in setting up your own small business budgeting strategies and further refine your expectations by considering where your company is located. 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.
4. It Pays to Stay On Top of Your Budget
Once you’ve come up with a viable strategy that can put the minds of investors and business partners at ease, you want to make sure that your company’s operations follow that roadmap closely enough that you’ll see the kind of success that was laid out in the pages of your business plan.
When you come up with good small business budgeting strategies, keep a close eye on the developments that follow the plan being put into place.
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 work.
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 few months. With the pace at which the world of business moves, 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. Read 3 tips for growing your business on a budget for more helpful info.
Can you find a space that’s just as good for a small amount of money? Is there any 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 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 ways to grow your small business profitably, check out our website at www.portalcfo.com.
Manny Skevofilax is a consultant and speaker that helps his clients successfully navigate the challenges of growing their businesses profitably. Since 2003, Manny helps businesses enhance their results by using his experience in strategic planning, financial statement analysis, operations, organizational development, 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.