There are two things every small business should have, a plan and a budget. With both of these things mapped out, you can truly excel at meeting your goals and power through setbacks. Without them, you might float along for a little bit and then crash and burn. Our focus today is on the small business budget. What to consider when building one, being realistic, and putting everything down on paper.
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Qualivian Investment Partners commentary for the second quarter ended July 30, 2020. Q2 2020 hedge fund letters, conferences and more “Short-term investors will accept a 20% gain because they didn’t spend the time to develop the conviction and foresight to see the next 500%.” - Ian Cassell Executive Summary Readers of investment letters fall into Read More
Every small business has to do some kind of marketing. There are plenty of “free” options online that can help you get the word out, but it does take time. If you are contracting a social media expert to handle your accounts online, you do need to include the cost of their time to you as a marketing expense (unless you hire an employee to handle it, that goes under payroll expenses). While free options can be helpful and money-saving, there are other options you should pay for. Search engine optimization is the vital tool you need to ensure that your blog, website, and social media accounts show up in search results and paying someone to expose you is a blessing. The offered SEO pricing will vary based on the company you choose and the length of commitment you choose. There are lots of other ways to boost your visibility but this is one cost you should make room for, others can wait until your budget increases.
Don’t forget to also include all your business cards and promotional printed items! Be sure to look for discounts when possible and only purchase what you must have on hand right now.
Not everyone has Warren Buffet on hand to help them figure out their budget. The one thing he would tell you to really pay attention to is your rent. This one can be a difficult one to narrow down. Everyone wants a high traffic location but not necessarily the high price tag that comes with it. You also don’t want to opt for the cheapest place you can find and people struggle to find you. You have to find the middle of the road where it won’t kill you to pay the rent and you can gather in plenty of customers. You have to be realistic about your available funds for this particular category. If you had a month with only about 10% of your usual sales, could you pay that rent out of pocket? If the answer is no, you might need to lower your budget in this area.
Other Operating Expenses
There are several other operating expenses you will need to account for in your budget. Utilities, payroll expenses, supplies and materials, repairs and maintenance, and even fuel expenses if you have a company vehicle. There are a lot of little things to consider into the budget and this is where you find many of them. It is also that place where you can be flexible. If you allow $30 a month for paper towels and you find yourself not spending that much, you can always adjust it down a bit and move that money to another category that could use it. That is especially helpful when you consider that electricity can fluctuate by season and you can cover it when you need a little extra.
Budgeting should be done on a monthly and annual basis. Adjustments should happen often as sales increase or as your company spending habits alter. These budgets will serve you well. They will give you a clear snapshot of how you are doing, show whether you are capable of obtaining a loan so that you can expand your business. It can also be your ultimate motivator. When things are hard, it’s easier to want to try harder and watch your sales numbers go up. When things are going really well, you will feel like you are accomplishing your goals and want to create new ones!