Step 8 Business Startup Budget

Updated: Feb 27, 2019

Before you can make money you have to figure out how to spend it. Drafting a budget is a key way to help you turn your dreams for business success into reality. By committing these numbers to paper, your chances of succeeding with your business increases by anticipating future needs, spending, profit, and cash flow. Since you have no past information to go on, you must create the budget using your best guess on income and expenses otherwise known as a profit and loss statement.

The first step, consider why you need to spend the time to create a budget. Even if you don't need bank financing, creating a budget is still a valuable exercise for any new and continuing business.

The less you need for startup, the sooner you can start making a profit. Begin by determining what you will need at the start of your business, in order to open the doors or take your website live.

Some questions you may want to answer before you begin:

  • What do you need to open the doors of your business on the first day?

  • What will your fixed and variable costs be on a continuing basis?

  • What can you contribute to keep costs low?

  • What can you get as donations from friends and relatives?

  • What can you do without?

A start-up budget will consist of a listing of these startup costs. Gather information on your fixed expenses each month. These are expenses that don't change and aren't dependent on the number of customers you have. Then add variable expenses. These are expenses that will change with the number of customers you work with every month.

Next estimate monthly Sales this is probably the most difficult part of a budget because you don't know what sales will be for a new company. To be realistic in your budgeting, you must assume that not all sales will be collected. Depending on the type of business you have and the way customers pay, you might have a greater or smaller collections percentage.

Create a cash flow statement, by combining total costs with total sales and collections for each month. For help with creating a budget find a good accounting software. Tips: Consult with an experienced bookkeeper or Certified Public Accountant for help after your business is operational and expanding. Avoid overspending by remaining aware of your budget allocations but leave enough room, for unexpected expenses or revenue shortfalls.

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