3 Tips for Small Business Budgeting You Can Do Today
Updated: Aug 6, 2019
For most business owners budgeting can be like pulling teeth. Between attempting to project costs and revenue, identifying burn rates, and planning for employee turnover, the whole process can be exhausting or downright painful.
Yet, for all of the pain, budgeting is one of the most powerful management tools a business owner has in their toolbox. It's basically like running your business for a year before it happens, giving you insights into potential obstacles you could face throughout the year. While it's true that budgets rarely reflect reality at year's end, the process of producing the budget can ensure you're aware of potential issues in advance. It also gives you a yardstick to measure against throughout the year, identifying potential problems while they're still small and manageable.
Whether you're new to business budgeting, or have years of experience, there are a few things you can do immediately to start getting your budget in line. Here are 3 easy things you can do today to start getting your budget in line.
1. START WITH SALES
Sales projections are the easiest way to get started with your budget. If you can figure out how much you're going to make next year, it's a little easier to plan what your budget will be. If you're a new company then you can plan for aggressive growth, while a more mature, established company may want to assume a 5%-10% growth rate to start.
2. GET COSTS RIGHT
While fixed costs usually don't change much, keep in mind they can change throughout the year depending on what's happening with hiring employees, input prices, etc. Fixed costs can also change as your company grows, so be sure your budget makes allowances for adjustments to fixed costs.
On the flip side, pay close attention to your variable costs since they can indicate several important things about your business. If they're going up it could be because you're selling more. Or it could mean your gross profit is going down. It's important to know the difference.
3. THE TRICKY STUFF
Every business has them, the random one-off expenses that come out of nowhere and sink your budget. So, plan for miscellaneous expenses in your monthly budget so you won't be caught by surprise.
If you'd like more info on budgeting tips, download our workbook, "Budgeting for Small Business" below.