Getting a small business started is the goal of countless entrepreneurs, and start-ups are so numerous and varied that there can be no simple guidebook for success. Many succeed and many do not, but one thing the successes have in common is a realistic budget going in. Without that essential groundwork and planning it would take uncommon luck for a new business to prosper.
What to Include
Common sense is the best guide, but there are templates available online that can be used like a fill-in-the-blanks form. A monthly budget is usually easiest to create and the most effective in terms of keeping track of progress. Start with pencil and paper if you prefer, or use one of the budget software packages on offer.
First list expenses that will be fixed, such as rent or mortgage payments and any others that aren’t expected to change in the foreseeable future. With a brand new business you won’t have previous monthly variables for reference, so do some research. Find out as nearly as possible what can be expected in monthly utilities, supplies and other variables from other businesses with similar requirements.
Basically your budget should clarify expenditures and income so that you can see from month to month whether the two are in sync with profit outweighing loss. If you have been reasonably accurate in estimated expenses and realistic in expected income it will be obvious when you balance the budget at month’s end. Here you have a three-column list, with the last column being ‘actual’ figures, both for fixed and variable expenses and for income.
Try to factor in every ongoing expense; there will probably be some that didn’t make it on your original budget. The more you learn about costs involved in your business the more precise you can be , and that makes it easier to see where you can trim some of the outgoing expenses and implement cost management techniques if necessary. When you calculate the difference between anticipated and actual figures in the first few months of operation, adjustments can be made.
Do Your Research
One of the most important points made by professional advisers is that market research before trying to launch your own business is absolutely essential. Business cost reduction can only take place when you know where your money will be spent in the first place. That means, amongst other things, studying the inside operation of successful businesses in your field. You need to have an accurate figure for the costs involved in running your business, so find out what competitors are paying and to whom. The same goes for income; you need to know who is paying how much for what particular product.
A careful review of your budget every month, assessing the balance of income versus outgo, will allow you to plan, re-budget and project probable results for the coming months. This is where success or failure is likely to originate; as you look at the numbers you’ll be able to see how you can begin to break even and turn a profit.
It’s a given that most start-up businesses don’t start paying for themselves in the first month, but a carefully planned, accurate budget based on reality is probably the best tool an entrepreneur can own, and it will save a lot of time, money and grief in the long run.