For many people who are just starting a small business, the budget process is often their least favorite part of the job. Budgets are essential in the business world, as a good budget will help your company grow and avoid unnecessary expenses. Many business owners make the mistake of thinking that all startups will go in the red, so they don’t need to stick to a strict budget in the beginning.
While you’ll likely need to borrow a lot of money to get the business going, you should still devise and stick to a projected budget every step of the way. While your resources will be limited, it is still possible to stay under budget (or at least on budget) in the early days of your business. Keep reading for a few ideas that will help you stick to your projected numbers as you go about launching your business:
1. Be realistic about income. One of the first tips for a new business is to be realistic about the income you expect to earn. Too often, entrepreneurs overestimate projected income, and a budget with an overstated income is as bad as having no budget at all. Many budget experts suggest purposely underestimating the income your company will earn the first few years, almost to a break-even type estimate.
Underestimating your income means you will work harder to keep your expenses as low as possible as well. Aside from not overestimating income for the business, be sure not to over-shoot when assigning income for yourself personally. Many entrepreneurs get in trouble when they give themselves a huge cut of the profits in the beginning.
Take what you need to get by when the business is in the startup stage, and save your aspirations for big paydays until later down the road when the company is actually making money.
2. Piggyback or share advertising costs. One method for keeping your new business within its budget is by piggybacking advertising by including material with invoices or other mailings. Include coupons in emailed newsletters or tuck them in the bag with the customer’s purchase.
You can also split advertising costs with other businesses in your community by offering a cross-promotion. If you own a bakery, consider teaming up with a local coffee shop that will offer reduced price, or even complimentary cups of coffee if a consumers presents a receipt from your bakery, for example.
Whether you use partnerships, cross-promotions, or clump together a few of your advertising methods, just remember that every dollar spent on advertising in the beginning needs to be helping to bring in customers. You don’t have the luxury of fancy advertising and marketing campaigns, so you’ll need to get creative, and often double up to ensure you don’t go over your budget.
3. Reduce, reuse, recycle. When you are first starting out, you want to look professional, but you don’t necessarily need all of the newest, nicest equipment. For example, if you are a small tech startup, you can buy gently used computers, printers, and tablets at a discount, rather than financing fancy new equipment for everyone. Many communities have companies that offer recycled printer cartridges at substantially less cost than new cartridges.
If you are setting up an office, don’t get roped into paying thousands for desks and chairs. Yes, you want to look professional, but you can get nice office equipment at places like Ikea for a fraction of the price. By sacrificing new equipment in the beginning, you will have more resources for building the business.
And if the business goes under, will it really matter that you had the nicest desks and laptops? Prioritize your purchases, and hold off on fancy equipment—reduce, reuse, and recycle when it comes to setting up your startup. It will pay off in the end.
4. Join trade associations. Although many trade associations have membership fees, they are often reasonable and could allow your company to get discounts on many items necessary to operate your business. Discounts always come in handy when you are pinching pennies in the beginning. Trade associations also provide excellent networking opportunities that could lead to long-term relationships in the industry.
When you join a trade association, you never know who you could meet, and what types of relationships you will form. This could be a helpful tactic for getting leads for your business, or a great way to network within the community for when you need a favor or community support.
According to professionals who provide credit card machines and equipment for businesses, every dollar you save during the startup phase is a dollar that will keep the business afloat. Once you’ve honored your budget consistently for months and years, the hope is that your business will take off. If you start out deep in a financial hole, you’ll never quite catch up.
Starting a new business is exciting and stressful all at the same time. By watching expenses and following a few tips, your new business can stick to its budget and begin seeing a profit much more quickly than businesses who do not pay attention to revenue and expenses.