Budgeting for Business Success

Half of 2010 is already over and my clients are busy preparing for 2011.  By now, they have a solid idea of what they need to do to close out this year and are starting to think of strategies for a successful 2011.  One of those tasks is to evaluate their budget for 2010 and begin putting numbers together for next year.

Creating a budget is hardly one of their favorite projects but a very necessary part of a successful business.  Listed below are the categories that your business should budget for as well as a brief explanation.  Remember that many businesses operate in cycles and you should be aware of the monthly trends therefore, each month may not always have the number.  There are some figures that are constant such as your rent or your salary (if noncommissioned workers) but others such as utilities, marketing and may fluctuate.

  • Accounting & Legal Fees: You can do it yourself but you should not.  It is imperative that you find an accountant and attorney that specialize in working with businesses of your size and type.  I suggest that you interview two or three before making your final decision.
  • Business Savings: All businesses should have goals and you should have some idea of how much it will cost to reach that goal.  Determine your goal, figure out how much it will cost, decided on a target date to reach it, divide your goal by the number of months to the target and that is how much you should be saving each month.  Is the amount too high?  Consider scaling your budget back or extend your timeline.
  • Consulting Fee: Meeting with a business consultant on a regular basis will ensure that you are on track to reach your goals.  A good consultant is also someone that will help you to make major decisions about the director of your business.
  • Continuing Education: Almost every industry is constantly changing and evolving, whether you subscribe to journals, take online classes or attend industry-networking events; you must stay abreast of the latest trends happening in your industry.
  • Equipment: Not all businesses purchase equipment on a monthly basis but allocating a small amount to the category on a monthly basis will help you to save up for the bigger purchases.
  • Insurance:  Consult an insurance agent that specializes in providing insurance for business clients.  They will be able to help you determine the right types and amounts of coverage for your business.
  • Inventory: This includes the purchase of all of the things that allow you to do the thing that you do.
  • Office Mortgage/ Lease
  • Office Utilities: Make sure that you consider all of the utilities that must be paid as a condition of your lease.
  • Payroll Expenses: This category includes your payroll taxes, worker’s compensation and any benefits that you provide to your employees.
  • Postage
  • Public Relations & Marketing: Whether you hire a professional or do it yourself, marketing is an essential part of building your business.  You can have the best product or service but if no one knows, who you are or what you do; what’s the point?
  • Salaries: You should each person’s salary and their employment type (FT, PT, temporary, etc) separately.
  • Supplies – Office & Operational: Supplies are the items like paper, ink, toner, pens, folders, etc that help you to operate the business but not those items that contribute to the creation of your product.
  • Taxes, Licenses, etc: The taxes and fees that your business is required to pay will differ based on the state that your business is located in.  Check your Secretary of State’s website for more information.
  • Telephone/ Internet
  • Travel:  Attending conferences and business related events will help you to grow your business.  Also, budget for local travel and entertainment.
  • Website Hosting & Maintenance:  Most businesses can benefit from having an online presence, but not all.  Make sure you carefully consider the benefits for your business to make a financial investment in having a website as opposed to utilizing free social media sites.

Next week, we will discuss using the expenses discussed today to set your sales goals.

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