Back to list December 20, 2018 How to Create a Business Budget Getting your business off the ground can feel like a small victory in itself, but if you haven’t done any business budget planning, your victory may be short-lived. Every business needs a plan for balancing expenses, revenue and profit. You want to maximize the latter while minimizing the former, of course, but budgeting for business is a lot more complex than that. Here are a few tips for creating a sound business budget. Keep in mind that the Cumberland Area Economic Development Corporation (CAEDC) can assist you with funding through business loans and other solutions, which we’ll also explore. 1. Separate Your Personal and Business Finances For bigger companies, this step may be a given, but small business owners often fund their startup costs by using their own credit cards. Stop doing that immediately, keeping in mind that you risk personal liability if you finance your business yourself. 2. Make a List of Your Expenses Expenses include anything you need to make your business run. Many of them are obvious. They include bills that have to be paid every month, such as electric and water, which are variable costs since their amounts may change each month. The monthly payment to lease your space is a fixed cost that will not vary month to month. You should be able to come up with a complete list of these fixed and semi-variable expenses by examining a monthly bank statement. Other expenses are more subtle. These variable expenses either pop up less regularly or vary greatly from month to month, but you need to have the money to pay them too. Examples might include: Labor expenses for those who work for you Services provided to customers, like free shipping New supplies Estimate to the best of your ability, then add them all up and divide by 12. The resulting number is your rough monthly budget. At minimum, you need to make enough money to cover these expenses. 3. Calculate Your Monthly Revenue Say you sell paintings. Ten sales per month can cover your costs, so you know you need to average that amount throughout the year to stay in the black. This information gives you a rough target each month. While you’ll be over some months and under some, you’ll benefit from having a goal to aim for. 4. Look Into Alternative Funding Sources Your income doesn’t have to consist of solely revenue made from selling products or providing services. Small business loans and grants can provide ample resources to draw on, especially for businesses that provide sorely needed services in the Cumberland Valley area. Consider the following options: CAEDC funding solutions, which can identify ideas you may not have heard of Federal or state funding, which CAEDC can assist you in pursuing Grants from a variety of organizations 5. Think About Your Future Goals Simply paying the bills is probably not why you started your business. You want to expand your company, get bigger, make more money or increase your contributions to the community. Write down your goals for the short- and long-term, and think about what type of financing you need to achieve them. Doing so will give you new bottom lines to shoot for. For instance, you may want to start saving for a future expansion for your building. Earmark these funds for that purpose only, and don’t dip into them, no matter how tempting it may be. You need to invest in yourself and your future to succeed. 6. Look for Ways to Reduce Expenses Do you really need to supply your employees with free coffee every day? Can you get by with a smaller office space? Will holding off on buying new furniture allow you to sock away more in savings? Do a thorough examination of your expenses every four months to see what fat you can trim. Something that seems like a necessity may actually be a luxury, and if you survive on a tight budget, getting rid of that expense could help you stay in business during lean months. Remember that you can always reach out to CAEDC for more information about budgeting for business and to hear other financial guidance tips. Get in touch with us today.