When you are opening a startup small business company, even before you can make and enjoy the profits of your business, it is important for every entrepreneur out there to first determine the ways they can wisely spend their capital or investment.
One of the most common reasons why a lot of startup businesses fail big time is that they have no clue how to invest their capital properly. Since you have invested not only money but time and effort as well, you will need to come up with a smart budget plan to set your company on the right track towards success.
Our goal is to help newbie entrepreneurs develop and harness their ability to write an effective budget plan. We have also provided a few sample templates that you can download or view as you peruse this article.
The Importance of Setting a Budget for Your Business
As an entrepreneur, I bet you have heard how budgeting is highly crucial for your business. Unfortunately, there are still a lot of startup entrepreneurs who do not have a clue how a budget can be essential for the success of their company.
Honestly, it does not really matter if you have a lot of cash to bankroll on your business. If you do not have an effective budget plan, there is a huge possibility that all your money cannot save your company from failure.
What is even worse is that you do not only lose your business, but all your money will go to the drain, too. These are the worst things can happen to an entrepreneur, and—surely—you do not want to go through that.
First of all, you have to understand that budgeting is not an easy task. You do not just list down all budget for the month. There are a lot of things to put into consideration in order to make your budget plan effective and successful.
Keep in mind that budgeting takes so much time and loads of mental analysis. That is why there are a lot of business entrepreneurs who prefer to use financial budget plan templates for convenience. So to help you understand the importance of setting a proper budget for your business, we have provided you a rundown of the budgeting factors to keep in mind.
1) It sets an overview of your revenues and expenses.
Knowing what to expect in terms of the revenues potentially earned and expenses that your company might spend, you will have an envision on how to balance your revenue and expenses or reduce the potential expenses and boost your business’ revenue.
You may want to download and use our printable budget planner templates. Or obtain useful ideas from the samples below on how your budget plan should be:
Restaurant Budget Plan Template
Business Plan Budget Template
Simple Business Plan Budget Template
Startup Budget Plan Template
12 Month Budget Plan Template
Project Plan Budget Template
2) It gets everyone on the same page.
Setting a budget plan is a smart way to keep everyone involved in the process of achieving your business goals. Without a budget plan, it will send the members of your organization to different tracks.
3) It makes you flexible to changes.
We all know that there is nothing constant in the business world. The costs of the commodities and supplies charge up and down depending on the movement of prices in the market. Setting a business budget plan allows you to adjust to the changes and get back on the right track.
4) It provides a financial road map.
As a newbie entrepreneur, it is important to have a financial road map for your daily business operation. Your budget plan will serve as your guide not only for this year’s budget but also for the years to follow. If there is a growth in your yearly revenue, you may use it to increase your budget and use it for future business ventures.
You can use the free budget planner as your reference in setting your financial roadmap or consider the templates that are provided below:
Drafting an Effective Small Business Budget Plan
Drafting a budget plan for your business is a lot easier if you have already created last year’s budget plan. Its financial projections, along with the actual revenue and expenses, will give you an overview of the estimates in the near future. If you happen to be reading this article, chances are you probably do not have any experience writing a business budget plan. Lucky you because we will provide you with some smart tips on how to draft an effective budget plan that is perfect for small businesses.
1) Develop a target goal for your sales and profit.
Since you will be running a startup business, it is important to develop a realistic budget plan that allows you to achieve your goals in the coming years. Make sure to determine your sales and profits as they can influence the rest of your estimations on the cost, expenses, and capital expenditures.
2) Make an accurate calculation of operating expense.
Start by checking out your financial statements if possible. Make certain to list down all the fixed and variable expenses incurred in the present year, such as utilities, taxes, rent, and salaries. If you are just starting up a business and still does not have any financial statement, be sure to determine or come up with an estimated cost that you will incur this year.
You may download and use our yearly budget plan templates for your reference. You can also get some ideas from the following templates:
3) Determine the margin of your gross profit.
If you want to determine the gross profit margin of your business, come up with a realistic estimation of all the goods you have sold and subtract it from the total sales revenue.
4) Consider readjusting the figures/values.
If you have already acquired the total estimation of your sales and expenses, you will feel the need to go back and make certain adjustments on the estimation so that it will be easier for you to reach your target goals. Use our daily budget planner templates to help your set your best foot forward.
Now that we have reached the end of the article, make sure to always keep this guide in mind when drafting your own budget plan. The more effective and realistic your budget plan is, the greater the likelihood you increase your chances of succeeding in your business endeavors.