We’ve only got about 10 more weeks of 2015, and that will fly by, I guarantee. You’ve got a lot to do to set up your business to succeed in the New Year, so take some of the pressure off by starting early.
Your budget is one of the big to-dos to tackle for 2016. If you don’t usually create a business budget, you need one! Here’s why:
- It gives you time to plan big expenses that you need to set aside funds for
- You can plan to take advantage of business expenses you can write off on your taxes
- You won’t be surprised when a big ticket item comes up if you plan appropriately
- Having a budget can help you grow your business
Now that we’re on the same page about why you need a budget, let’s look at some strategies.
Look at What You’ve Spent in the Past Year
Even if you’ve never created a business budget, you probably can look back over the past few years of running your business and see very similar expenses year after year. You’ve got your email marketing software subscription. Your accounting service. Your employees and subcontractors. Inventory. Marketing. Use these to create the bare bones structure for your budget.
What’s Not Working?
Cut any expenses that aren’t bringing you results. If you never use your email software because no one buys from your emails, cancel it or change your copywriter. If you’re still paying for a sales guy who is not generating sales leads, don’t use them anymore, cut your headcount. This frees up your budget to put more attention and dollars on new things that can bring you better results.
How Much is Left?
Once you pay your expenses, do you have money left over? Hopefully you’ve steadily increased what you earn each year, and you’ve got a nest egg for savings or other investments that will grow your business. Next, you’ll decide what to do with that excess. Sure, putting it in your pocket is always fun, but reinvesting it in your business can help you make even more money!
Ask Yourself Where You Want to Budget More
Now that you know your usual expenses, get creative. Where would you like to put more money in 2016? Marketing is always a good investment that nets a solid ROI. Maybe you can budget to hire a marketing consultant, publicist or invest in more in online advertising this year.
Create Your Formal Budget
Now that you’ve sketched out what your budget looks like, make it more formal with line items for each type of expense. Start with your business income, expenses and sales taxes, since they’ll be a biggest chunk of your budget.
Now, break the annual budget you’ve created down into quarterly budgets. This is more manageable, and you’ll be able to keep your eye on what you’re spending and curb it if you hit the quarterly limit. Your quarters might not be identical in terms of spend. For example, if Q4 is a big one for you, you’ll probably need to increase your marketing and advertising spend, as well as payroll, to fit your needs. That means you’ll need to spend less on these items in the other quarters.
Having a budget for your small business can keep your cash flowing, help you zero in on the expenses that will really grow your business in 2016. Remember, you must plan for success it will not just happen to you.