Budgeting for Your Small Business
If you’re a small business owner or entrepreneur, managing cash flow is crucial to your success.
Becoming a small business owner is an exciting and stressful time for any budding entrepreneur. You’re likely at a stage in your life where you’ve accumulated years of experience and a network of peers and potential clients to help you get started.
But the big question is, of course, how much money will you need to stay afloat before you turn a profit as you get your company established.
Your type of business matters when looking at savings. If you’ll need large-scale equipment, transportation or employees immediately, you may need funding in the hundreds of thousands, if not millions. If you plan for something smaller scale, where you work from home and by yourself, you may only need a few thousand dollars.
Your budget should include ongoing costs such as:
- Office supplies (paper, toner, etc.)
- Marketing materials (advertisements, business cards, etc.)
Your budget may also include bigger upfront costs such as:
- Building purchase
- Equipment purchase (vehicle, computer, etc.)
- Marketing materials (logo, website, etc.)
- Legal fees/state incorporation fees
While you may have plans to develop a sprawling empire, it’s best to start with a strong foundation and avoid spreading your resources too thin.
Consider these tactics when looking at initial and ongoing business expenses:
- Location– Overhead costs of maintaining a storefront or office space are huge. You’ll save big if you are able to run your business out of your home until you’re more established.
- Tax deductibility– Many of the costs of running your business will be tax deductible. Keep organized receipts and paperwork to use at tax time.
- Cashflow– Improve your cashflow and overall liquidity by invoicing clients promptly and delaying any payments until they are due.
- Equipment – Look into renting or buying used equipment wherever it makes sense.
- Separate accounts – Keep you finances tidy by organizing your business and personal expenses separately, including opening separate business accounts.