The most important part of a successful business launch is to establish a solid budget before anything else. The shape of your budget may change over time, but when you are just starting out it is important to have a solid financial plan laid out. It great to have a dream and a purpose, but for many, without the financial backing and planning, many plans can fall flat.
Not only should you plan out a budget for your own use, but you will need to have one to present to any possible investors. Many financial
Figuring out your costs and expenses will give you a clearer idea of how to move forward with your start-up. You need to consider the type of business that you are in and account for all of the things that you will need to open on day one.
Always estimate high on expenses and low on profits to give yourself and your investors a fair look into the future. Everything from office equipment, inventory, oil filtration systems for your production equipment and fleet vehicles need to be added to your start-up budget. Let’s take a look at the important things that should be included in your start-up budget.
If you aren’t working out of your home you will have facility expenses to consider. It may renting or leasing and office space or building a warehouse for your endeavor. Production equipment and inventory can be a large part of your start-up costs. Make sure that all of the following things are also added into your Overhead budget:
- Business Signage
- Utility Hookups & Installations
- Office Equipment
- Legal Fees
- Accounting fees
Fixed monthly expenses
These are the things that you will be paying out on a monthly basis. Things like your rent and your heating and electric bills are considered fixed monthly expenses. If you are leasing equipment or vehicles or have hired any professional consultants, these are also in this category. Basically, any expense that is repetitively paid on a monthly basis like internet or cell phone charges are fixed Monthly Expenses.
Variable monthly expenses
These are the expenses and fees that change from month to month. Your commissions expense, production costs, packaging and shipping prices and income taxes are all subject to change from month to month. When outlining your budget you will have to rely on an average estimation of these costs.
Before you have even opened for business you will be expected to estimate your annual sales and provide a projection to your financiers and investors. When calculating your sales estimate, take a number that is somewhere between “optimistic” and “worst case” to get an average picture of your projected sales goals.
The first year of business is the most expensive with most of your budget being used for start-up costs. Don’t let this discourage you. Many business take more than a year or two to see any profit before they become successful.