4 Practical Budgeting Tips for Your Small Business
Starting a business requires several steps and even more courage. First, you need an idea. Then you need the means to get that idea up and running. Once you’ve built your business, you need to work on sustaining it. This is the stage where many small businesses fall apart, mostly due to poor budgeting.
It’s completely understandable to be super excited about your new company. However, don’t let the excitement get the best of you—you can’t just plow through your budget in the first month, assuming you’ll earn it back.
If you’re struggling with the financial side of entrepreneurship, read on for four tips on how to manage your company’s budget.
#1: Keep Employees Happy, but Don’t Overdo It
A common mistake many small businesses make when creating their budget is allocating too much money for luxuries. While it’s great to work in an office that always has snacks or have a boss that buys you lunch every day, it’s simply not practical.
While this isn’t an excuse to completely ditch morale boosters, you still have to make sure your “fun” expenses aren’t outweighing your actual income. It’s perfectly fine to provide snacks and drinks at the office if you can afford it, or bank business trips when necessary.
Balance is key here. Employees won’t hate you for providing what you can actually afford. While it’s nice to work for an employer that pays for your lunch, most employees would rather work at a company that pays their salary, which won’t be possible if you go out of business in the first year because you spent too much money on poke bowls and artisanal seltzer waters.
#2: Prepare for Surprises
A common mistake people make when crafting a budget is forgetting to leave in some wiggle room. Life is unpredictable. You never know when you may get an unexpected expense—your computer needs a repair, the economy plummets, or you’re hit with a dreaded IRS audit.
Don’t allow yourself to be caught off guard. The best budget for any company, large or small, has some money set aside for emergencies. The best way to budget is to prepare yourself for the unexpected—because no matter what crosses your path, a little money tucked away can never hurt.
#3: When in Doubt, Hire a Professional
Not every business owner is an expert in finances, and that’s perfectly fine! If you can fit the cost into your budget, it’s strongly recommended that you seek out a professional who handles wealth management. Having an expert by your side will provide security in this ever-changing economic climate. A wealth management consultant will help you save, plan for changes, and put together an appropriate budget.
At the end of the day, you can’t do every job within your small business. Whether you’re selling fashionable sunglasses or building the next big rideshare app, make sure you leave the money handling to the experts.
#4: Re-Examine Your Budget Periodically
If there’s one thing you can count on when running a business, it’s change. The money you’re making is bound to change year-to-year or month-to-month (and sometimes even day-to-day). The budget you made in your company’s early stages probably won’t accurately reflect the needs of your business a year or two down the line.
Whether your income has increased, you’ve hit a rough patch, or your company has expanded, make sure your budget reflects these changes.
A company’s budget isn’t set in stone. It’s important to be flexible and adjust to the inevitable highs and lows that come with business ownership. Most larger corporations write up a new budget on a yearly basis, but as a small business owner, you may want to take a look at yours far more often than that. Be sure to keep up with economic shifts and re-evaluate your budget every few months, just to be safe.
Protect Your Finances
Don’t let your dreams of building a business be squashed by poor financial planning. While you may not have a degree in finance, that doesn’t mean you can’t achieve a well-rounded budget for your company. Staying on top of things, allocating the appropriate funds for each department, and establishing a savings account are all achievable financial goals that any small business owner can work toward.
And when things start to get a little rough and tumble, there’s no shame in reaching out to a professional for help.