How can you ensure your SMB’s budget stays on target?
Although starting a small business can be an exciting adventure, it takes a lot of planning and dedication.
It is important to create a budget for your SMB, particularly as more than half of small businesses fail within the first year.
This budget guide is simple and will give you the best tips for making your small business successful.
Why is Budgeting Important for Your SMB?
Owners of small businesses know how difficult it is to keep up with the demands of social media, digital marketing and influencer marketing.
However, businesses are not all the same. Some businesses may be more dependent on social media posts and keyword research to improve their business performance.
Other businesses may find it easier to create a system that brings in new clients and money without much effort.
No matter what business model you choose, your business must maximize profits and minimize expenses.
Budgets can help small business owners manage their finances more efficiently, track unnecessary spending, identify problems, and make better financial decisions.
The best recipe for success is to invest a reasonable amount time understanding your business.
Spend as much time as possible on your budget than you do on marketing.
This will help you see your SMB in a new light. A budget that is simple and effective can help you achieve your long-term financial goals.
How to Create a Business Budget for Your Small Business
People often struggle with financial planning and budgeting. It’s an essential part of every business.
Financial decisions can either make or break your SMB. This article has some key points that have been helpful to many businesses.
To compile a basic budget, you don’t necessarily need expensive business software. There are plenty of resources and tools online that can help.
It is much easier than you might think to create a budget for a successful SMB.
1. Find Income Sources and Calculate Monthly Revenue
To have a clear picture about how you make money, it is important to identify all income sources.
Calculate the income from these sources to help you manage your money.
You can use relative estimations to determine your potential income if you are just starting.
2. Reduce Fixed Costs
It’s now time to calculate your monthly expenses. These are the things that you spend money every month on, such as rent, insurance and raw materials.
These costs will give you a better idea about how much you are spending each month. Make a list of the things you must pay each month.
To reduce costs for your business, you might consider obtaining assistance from institutions like Castle Water.
It is important to determine the costs of recurring expenses such as salaries for employees, services, hiring new employees and to save money for an emergency fund if you have a tight budget.
3. Identify Variable and Once-Off Costs
Each industry has variable costs which vary from month to month.
You might find that your utility bills are higher or lower depending on how much work you have done in a given month.
You might be responsible for an annual, one-off website hosting cost, recurring paid ads or Bing ads, as well as fluctuating logistics costs in certain months.
Calculating your small business’s variable costs and one-off costs can save you time and money.
4. Monitor Your Small Business Cash Flow
A cash flow statement is a must-have for any SMB owner.
Understanding the difference between profit and cash flow is an important part of budgeting. This article from Harvard Business School explains it well.
5. Revise & Replicate
Consistency is key. This means that you must revise each step regularly and repeat the process.
This will allow you to understand your SMB and determine if it’s making enough money.
It is important to review your budget at least once a quarter. This will help you determine if your SMB is performing optimally.
You can help your business grow by reviewing your budget and calculating projected figures.
Is this a good idea for all businesses?
This budget guide is applicable to all businesses.
No matter how many salespeople a company has, there are always ways you can cut variable expenses. Budgeting correctly will result in more money in your pocket.
Do you need accounting experience in order to use this budget.
No! While accounting experience and financial knowledge are a plus, they are not a requirement. Anyone can use this budget guide to help ensure your business succeeds!
Does the budget also apply to social media companies?
Yes! You can use the same 5-step budget whether you are a social media manager, or if you own your own company.
Although your business’ operating budget may be smaller than that of small businesses selling goods locally, the principles are the same.