Launching a new business venture is a heady adventure, to be sure. It can also be an incredibly overwhelming experience. The best way to ensure that your business gets off on the right foot is to start with a solid small business budget plan.
Taking the time to create a budget plan allows you to organize your business in a way that maximizes your chances of ultimate success.
Read through the handy step-by-step guide below to learn how to create a successful small business budget plan.
Conduct Industry Research
Before you sit down to start working out the details of your budget plan, take the time to do a bit of research into the industry as a whole. Look to the published financial statements of other established businesses within your chosen sector and extrapolate those findings to your own business.
General industry-specific reports published by official state, and federal government agencies may also help to flesh out a picture of what sort of profit margins are possible, what types of costs should be factored in, how stable the industry outlook is for the current time, and how much growth is expected in the future.
Having a solid understanding of the overall industry that your business will be competing in will provide you with a solid foundation of knowledge to begin building your own unique small business budget plan.
Decide Budget Length
As you begin laying out the framework for your business budget plan, you will need to determine how long of a period you would like your business budget plan to cover.
The length of time for your budget plan will largely depend on the reasons you are creating the program in the first place. For example, suppose your primary goal for starting a business budget plan is to get a better grasp of your business expenditures and growth potential so that you can adjust your business activity accordingly. In that case, you may consider a series of shorter plans.
Many businesses will create an annual budget plan, along with smaller break-out quarterly budget plans to help them budget the best times to make more significant ticket business upgrade purchases and better manage their overhead costs.
However, suppose you are in the very beginning stages of launching your business, and you are creating a business budget plan in the hopes of securing financing or funding to get your business off the ground. In that case, you are going to need an extended business plan. To ensure a business loan from most funding sources, you will need to estimate profit and loss data based on your initial research and present approximately three years of solidly researched business projections.
Estimate Projected Revenue
Now that you have done your research and established the purpose and length of your business budget plan, it is time to start adding in the critical data. The first figure that you will need to estimate is the projected revenue for your business. The business launched payment is the amount of income you expect your business to generate after all expenses have been paid.
Determining projected revenue can be a little bit tricky. Of course, you want to be as accurate as possible, but there are many unknowns in business, so some degree of estimation is required. For example, if you were creating a personal spending budget, your projected revenue would be your expected weekly or monthly paycheck. Still, when starting a business budget, there is simply no way to guarantee what the business revenue will be from week to week, month to month, or year to year.
In the absence of hard and fast data, you will instead create projections based on either the past month or year of known data or, in the case of a brand new business, industry, and competitor figures.
While projected revenues are essentially educated best guesses, they should be based upon as much complex data as possible.
The following figure that we will be adding to the business budget plan is the actual or projected costs that the business is expected to incur. Again, determining your average business costs will be a little bit easier than picking projected revenues because many business costs are well-established and reported, so you will have pretty solid data readily available to use in calculating the projected costs of launching, equipping, staffing, and running your business.
The critical point is to make sure that you have included absolutely everything in terms of business costs. Even the smallest of expenses could add up quickly and derail your entire business budget plan if they were not adequately factored into the budget at the outset.
It is a good idea to start with a good old-fashioned brainstorming session. Take out a pen and a piece of paper or open up a fresh spreadsheet on your computer and start listing out every item that you have purchased or will need to purchase for your business, the supplies that you need to create your product, the equipment that you need to perform your service, the software and office supplies that you need to operate the business and customer service end of your business, and the physical location to house your business.
Don't forget to also factor in the various staff, workers, contractors, and third-party service providers that you will need to pay to help you run your business as well. This includes any web designers, SEO content providers, digital marketers, and other digital service providers used to help build your company's online presence.
Profit & Loss Figures
Now that we have the bulk of the essential data about your business factored into the budget plan, we can start to tie it all together to get a solid idea of your business's current or projected health.
We can determine the business's overall health by generating a profit and loss report from the assembled projected revenue and expenses data. Essentially you will subtract the calculated expenses for any given period from the projected revenue for that same period. If you are left with a positive dollar amount after deducting expenses, that is considered a profit. Conversely, if you are left with a deficit, or a negative dollar amount, after subtracting expenses, that is regarded as a loss.
Generally, a business will generate profit and loss reports monthly, quarterly, and annual to help them stay abreast of changing business trends. However, suppose you have a month or two of generated profit and loss reports showing a deficit rather than a profit. In that case, it is a sign that you need to re-examine your business budget plan and make any necessary adjustments to get your business back into the black.
Factor In Savings & Reserve Funds
Once you have laid out a solidly researched and meticulously detailed business budget plan, you may want to take one final step. It is a solid idea to build in a bit of extra in the expenses category to plan for unforeseen shifts in the economy, industry demand, supply shortages, increased labor or production costs, and other unexpected but potentially significant costs.
You can do this by allotting a specific dollar amount into a business savings account or reserve capital fund monthly, quarterly, or annually. By budgeting this contribution to savings into your business plan as a cost rather than waiting to take it out of revenue later, you can make sure that the funds make it into a savings account.
It is far too easy to put off making payments into a business savings account or reserve. Still, if these savings deposits are viewed as regular payments or expenses, you are more likely to build up a healthy business reserve fund. This reserve account will provide the financial cushion your business needs to weather the inevitable downturns and expenses that are part and parcel of running a business.
Creating and sticking to a small business budget plan can be daunting. Thankfully, plenty of tools and services are available to help you in your endeavor. Dexterous Media Group is a full-service digital marketing agency and so much more, offering small businesses all of the tools and expert assistance they need to help get their business up and running. Our team of experts is ready to help you with everything your small business needs, including web design and development services, effective SEO, video editing, animation, social media marketing and management, full-service marketing automation, live streaming events, and so much more.
Contact Dexterous Media Group Today!
When you are ready to take your small business plan to the next level, make sure to give us a call or visit us on the web to find out more about the exciting range of services we provide to help small business owners just like you establish and grow their business. We can't wait to hear from you and hear all about your small business plans!