Budgeting may not be the most exciting task, but it is essential for the health of your small business.
Starting a small business can be an enriching experience, but it can also be challenging financially. Having a budget right from the start will help you track your spending, stay within your means, and plan for the future.
By following these simple tips, you can set yourself up for financial success!
1. Create A Realistic Budget
Many businesses fail because they underestimate their costs or overestimate their income.
Creating a realistic budget at the start of your small business venture will help you stay on track and avoid making costly mistakes.
To do this, you need to account for all of your income and expenses:
- List your fixed costs, like rent, insurance, and salaries.
- Estimate your variable costs, like materials and advertising.
- Calculate your total revenue and compare it to your total expenses
2. Track Your Expenses
Once you have a budget, you must track your expenses and ensure you’re staying on track.
There are several ways to track your expenses, such as using a spreadsheet or tracking app. Whichever method you choose, include all your business-related expenses, such as supplies, marketing, advertising, rent, and payroll.
Update it regularly so that it accurately reflects your current situation. You can make sound decisions to help your business thrive with a clear understanding of your financial situation.
3. Look for Ways to Save Money
Be strategic about the products and services you purchase and look for ways to get discounts or subscribe to a free plan. Don’t be afraid to negotiate. It’s perfectly acceptable (and expected) when trying to get the best price for goods and services.
Another area to focus on is employee costs. Hiring full-time employees can be expensive, so consider using independent contractors or part-time workers. You can also look at investing in tech tools to automate mundane tasks.
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4. Make a Plan for How You Will Bring in More Money
Without a reliable source of income, keeping your business afloat won’t be easy.
Start with understanding your revenue streams:
- Are you selling products or services?
- Do you have a subscription model?
- What are your pricing tiers?
Having a clear picture of your incoming cash flow can help you create a pricing strategy that will allow you to generate a profit while still providing value to your customers.
Consequently, you’ll be able to develop a sales and marketing strategy that will help you reach your target market and close sales. Taking the time to create a well-rounded plan for bringing in money will ensure that your small business has a solid foundation for success.
5. Be Mindful of Your Cash Flow
As any small business owner knows, cash flow is essential to keeping the business afloat. Simply put, cash flow is the movement of money in and out of your business.
It’s important to be mindful of your cash flow because it can directly impact your budget. You need to be on top of all the costs of running your business, especially the recurring expenses.
Check if your business is bringing in enough money to cover your expenses. If not, then it can quickly jeopardize your business. On the other hand, generating more income than you’re spending can give you the financial cushion to invest in growth opportunities.
Budgeting for Small Business FAQs
What are the basic elements of a budget?
When budgeting, you need to identify your cash flow: estimated revenue, fixed and variable costs, and one-time expenses. Revenue minus expenses will give you your profit.
How much money do I need to start a small business in the Philippines?
It will depend on several factors, including the type of business you’ll open and the resources you’ll need. Aside from the capital, there’s also the cost of registering your business.
Evaluate Your Business Regularly
Budgets are living documents that should be revisited regularly. And following these budgeting tips for a small business will help you keep on track financially.
With planning, discipline, and consistent financial check-ups, you can keep your business finances in good shape and avoid unwanted surprises down the road.
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