Did you know that 45% of new businesses fail during their first 5 years? If you are a newer business and want to make sure that you stay out of this statistic we highly recommend creating a business budget early on. We have put together this short guide to share how to create a business budget that you can stick to.
Keep reading to learn the ins and outs of creating a budget for new business.
1. Take a Look at Your Revenue
The first thing you need to do is take a look at all of the income coming in and your income sources. Add everything up to see what your business revenue is each month or to get an average of your monthly income.
Keep in mind that the revenue is the money that is coming in before you are paying expenses. If possible do this for the previous 12 months in order to have a better average idea. This will also allow you to see if your business has seasonal patterns where they have slumps or higher sales.
2. Fixed Costs
The next step when making a budget is to make a list of all of your fixed costs and add them up. Some examples include insurance, supplies, rent, payroll, etc. With this total then you can subtract it from the monthly income that you figured out in step 1.
3. Variable Expenses
Once you have all of your fixed costs listed then it is time to look at the expenses that vary such as marketing, commissions, and outsourced billable hours. This list is important to have because it will make it clear where you can sometimes afford to cut back if your budget is running tight.
4. Drafting the Business Budget
Once you have your fixed costs and variable costs you can add those up and subtract them from the revenue amount. Hopefully, you end up with a positive number because it means that you are in the profit each month vs being in the negative.
If you end up with a negative number then you will have to look at where you can cut back on expenses and set yourself up for profits in the future. Depending on your type of business you want to also look into something like Jane chiropractor EHR to help you with staying organized.
We recommend setting up three different budgets – a yearly one, a quarterly one, and a monthly one. Hold yourself accountable to stick to the budget and not go over because after all, you are in business to make money.
Ready to Start Creating a Business Budget for Your Business?
We hope that now that you are aware of the exact steps to take when creating a business budget you are feeling confident moving forward.
If our blog post came in handy please feel free to continue browsing the rest of our business section to learn our latest tips and tricks.