Building a budget for a business is a complicated task. Even more so, if your business is a startup, then the number of challenges increase. When it comes to budgeting, every rupee plays a vital role in constructing a startup budget.
A survey report of 2020 shows that 50% of small businesses didn’t create a documented budget, but why? Well, most certainly is because they consider it as an unnecessary thing. According to experts, a company may forgo a formal budget because creating one seems obstructive.
These small business owners see budget as something that will limit their business growth by tying them down to a rigid figure. Do you agree with this idea?
Our approach is to help create a financial plan for your startup business, and sticking to it is essential to complete all your goals. Otherwise, your business will get demolish before establishing.
We bring this guide to help you manage the budget plan for your new business and give you a clear idea of your vision. So, dive in!
1. Set A Target Startup Budget
While reading this blog, quickly grab a book/computer or any tool you usually write. Many people underestimate the importance of setting a budget aim to achieve. Tools like MS Excel, Google sheets, or any other financial planning software like My EasyFi are great for integrating your financial plan.
2. Write Down Your Income Sources
During developing a budget, it’s crucial to know where your cash flow is coming from. One effective way to calculate your earning is by using customer feedback and personas to estimate their purchasing frequency.
Always be mindful when counting the potential revenue or funding sources such as savings, investment, loans, etc. Please discuss with your employees and narrow down the projects to take up because it’s favorable to become a master in one project than handling three of them poorly.
3. Categorize Costs Into Revenue
The simple method to categorize costs is to divide your expenses into capital and operational expenditure. While doing so, make sure to mention all financial information associated with each project phase. This will help you in aligning capital spending with your long-term financial goals.
4. Define Variable Costs
The most common variable costs that can hit your budget are:
- Shipping cost
- Freelancing services
- Advertising expenditure
- Raw materials
These expenses fluctuate according to your sales, production, and market prices. So, when you make a request quote from contractors or manufacturers, consider the time and season that may affect the cost as well as the travel budget.
5. Accommodate Taxes
If you have a debt, you need to pay up interest fee. However, having a large cash balance will get you interest income. Moreover, you also need a budget for annual taxes. So, if you are facing net operating issues, ensure that you accommodate your interest and taxes before setting your target budget.
In A Nutshell
Budgeting is key for a successful startup business, and many small businesses need to understand this factor. The best thing about money tracking for a startup is that you have hundreds of trends to experiment with while seeing what works the best for your business.
If your need assistance with budget management software, you may contact My EasyFi for the best financial solutions.