How to Set Realistic Budgets for a Business Proposal

Any business proposal or plan depends on honesty and careful planning. A realistic budget ensures that your proposal translates into a successful business. It also helps you avoid nasty surprises as you build your business. Plan a realistic budget in the proposal and you avoid financial crises later.

Difficulty:

Moderate

Instructions

1. Set the main categories of your budget based on your type of business. In general, these include salary and benefits (labor), equipment, rent and utilities, supplies, marketing, insurance, services (such as legal retainer fees) and taxes. Mentally review an entire month to capture projected monthly expenses.

2. Organize these categories from largest to smallest. In most instances, the cost of labor is the most expensive budget item, but equipment might be larger in some cases. Remember that using the cheapest labor or the cheapest supplies may compromise the quality you can offer your customers. Using high-quality people and supplies produces high-quality products that retain customers.

3. Determine set-up costs you must incur before you can begin. People often forget these items because they only occur once: office equipment, fees and permits, software or phone installation charges.

Tips & Warnings

• Remember that in any given month you might need to buy more supplies than you use. This inventory cost can safely be estimated at 10 percent of total monthly supplies.

• Remember to budget for office supplies, too.