How to Plan a Business Budget
You've studied the market and identified your niche. Now that you've got a viable product or service and a successful business model, it's time to focus on how you intend to fund your business. Typically, there are three options for funding your business: through an investor, through a bank or with your own money. No matter which funding method you choose, for your business to have any chance at success, creating a business budget is essential. As you identify the financial factors in your budget, use conservative figures when determining profits.
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Instructions
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Create a 12-month cash-flow Excel worksheet. List one month per column, and then fill your rows with financial details. This will give you an easy-to-read budget that you can also include in your business plan.
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Identify your start-up expenses, which are those things needed to get your business off of the ground. Business cards, legal fees, consultant fees, advertising, stationary and equipment may be included in your start-up expenses. These may be eligible for a tax deduction of up to $10,000. Identify your constant expenses. These may include cost of goods sold, rent, employees' salaries, worker's compensation and liability insurance, web hosting fees, marketing, taxes, loan interest and rent.
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Detail your profit. Project expected cash inflow using previous profit margins or by analyzing similar businesses. Visit local stores that sell similar products and services, taking note of customer traffic patterns.
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Subtract your expenses from your profit. If you are operating at a loss, you will need to take a good look at your expenses. Sit down with your management team, your mentor or someone you trust to determine how to cut costs. Consider changing suppliers or contacting your supplier and requesting a better rate. Don't be afraid to ask for a better deal. If you have an excellent repayment history, they just might cut you some slack.
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Review your budget regularly for ways to decrease costs.
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Tips & Warnings
For 2009, there are a number of tax breaks for small businesses that can significantly lower your tax liability, such as the Section 179 deduction. Consult an attorney or visit the IRS' website for details (see link below).
Resources
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