6 Things Entrepreneurs Need to Know about Budgeting
Running a new company isn’t easy.
If you’re just starting out, you’ll find that there are a lot of things you need to think about. That doesn’t just apply to what you’re going to sell, or how much you’re going to charge your customers. You also need to consider what your business budget is going to look like, and how you can keep your finances on track.
As good as you might be when it comes to running your business, the chances are that you’re not nearly as good at managing your accounts. After all, few people have the same background knowledge and expertise as a trained accountant. However, there are a few tips you can follow to get your budgeting strategy in check.
1. Know Your Company Costs
Regardless of whether you’re running a graphic design company, a specialist store, or just a number of side hustles, all businesses cost money. The first thing you need to do as an entrepreneur is figure out how much you’re going to need to spend on everything from materials to marketing and even employees. Think about what you need to get your company up and running and keep it operating.
Remember to keep variable and fixed costs separate in your plans. For instance, your rent will likely cost you the same amount each month, but your marketing might not.
2. Understand your Loan Options
Unfortunately, most people won’t be able to afford to launch their business out of their own pocket. Even if you’re running a pretty inexpensive business from home, there will be costs to think about. For instance, you might need to invest in a new computer, software so you can support your clients, and more. On top of that, there’s the expense of building a website, hosting your domain, and marketing your company to think about.
Fortunately, there are loans available for businesses. However, if you haven’t got any history as an entrepreneur, it might be easier to take a personal loan out instead. Talk to a bank about your options and then shop around until you find a deal that suits you.
3. Keep Personal Costs Away from Business Costs
This is one of the most essential pieces of financial advice any entrepreneur can get – so pay attention. Separating your business and personal costs will help you to track whether your company is making enough money to succeed. You’ll also be able to figure out what kind of expenses you can deduct when it comes to tax season.
When it’s time to hand over your accounts each month, the last thing you want is for the government to discover that you’ve made a mistake with your numbers.
4. Always Save Money Aside for Taxes
Taxes are one of the worst parts of being an entrepreneur. When you’re employed by another company, your boss handles all of your tax concerns for you. That means that you don’t need to spend nearly as much time worrying about how much you have to save. What’s more, the rates you pay as a sole entrepreneur or business owner are different to the ones you pay as an employee.
Set a good portion of your income aside each month – usually about 30 to 35%, to make sure that you’re not caught off guard during tax season. You might not be happy with taking an income cost, but you’ll save yourself some trouble in the long-term.
5. Forecast your Upcoming Income
To get the most bang for your buck out of your budgeting process, it’s helpful to plan for how your company might perform in the years ahead. The truth is that no-one can see into the future, so you won’t always be correct with your predictions. However, you can give yourself a good visual to aim for. Think about:
- Increases in rent or material costs
- New lines of business
- Changes to your product or service portfolio
- Planned hiring
- Changes in contracts and consumer relationships
- Price Increases
6. Keep on Top of your Budget
Budgeting is far from the most exciting part of running a business, but it’s something you can’t afford to lose track of. Don’t treat your finances as a set it and forget it concept when you become an entrepreneur. You’ll need to make sure that you’re always aware of the ins and outs of your cash flow, so you can stop your business from facing any significant disasters.
There are tools and apps online that can help with tracking your incoming and outgoing expenses too- so there’s no excuse for not making sure you’re up-to-date.