Business Startup Budget! Did you know that around 20% of businesses fail within their first year?
If you’re starting a business, you would want to be part of the 80% that make it past their first year, and the 50% that make it beyond five years.
Having a successful business begins with a reliable business startup budget. If you don’t have a good budget before you start a business, you’re likely to get into financial trouble before very long.
Read on as we look at five tips for creating a business startup budget.
1. Plan for Day One
Your budget needs to be targeted towards day one of your business. That means having everything you need in place to open your doors or launch your website, or whatever day one of your particular business looks like.
You need to factor in everything required to be ready to roll on that first day. Think about what day one will look like and what you’ll need to have done beforehand to be ready for day one. This includes often overlooked things such as registering your business.
2. List All Startup Costs
Now that you know what day one looks like, you need to write down all of your startup costs. These are costs involved in getting your business ready to start operating.
You’ll need to think about what assets you already have, what additional assets you’ll need, and also what expenses you’ll have to cover. For example, if your business has premises, you’ll need to start paying rent before day one in order to have access to the premises to get it business-ready.
3. Estimate Fixed and Variable Costs
Next, you need to estimate the costs of running your business.
These fall into two categories; fixed and variable costs. Fixed costs won’t change from month to month. These include things such as your rent, utilities, insurance, etc.
Variable costs are those that change depending on how well your business is doing. These can include postage and packaging costs and materials or stock costs. Variable costs are harder to predict and might even need help to pay the bills.
4. Estimate Your Incomings
Now you’ll need to estimate what money will be coming into the business.
Some of this may be a fixed monthly amount, such as a business loan. Money from sales will again need to based on a sensible estimate. We all want our businesses to succeed, but don’t go crazy when estimating how much you think you’ll make in your first few months, or your budget will soon be blown.
5. Figure Out Your Cash Flow
Finally, it’s time to compare incomings with outgoings in order to work out your cash flow.
This is the most important part of your budget. Many businesses fail because they run out of cash, even when business is booming. This is because they didn’t keep control of their cash flow to ensure that they always had enough cash available to cover any outgoings.
Are You Ready to Create Your Business Startup Budget?
By following these tips, you should know how to create a top-notch small business startup budget and have a better understanding of your cash needs.
Remember that you need to be honest with yourself when creating your budget. Overestimating your earnings or underestimating your costs could put your business at risk before it’s even started. Err on the side of caution; it’s always better to budget more than you need than less.
If you’re looking for more useful tips for business, as well as a wide range of other topics from lifestyle and education to jobs and careers, then be sure to check out the rest of the site.