Running a small business is rewarding in many ways: you are your own boss, you can have a balanced work/personal life schedule, and you are free to aspire at higher earnings than a fixed monthly salary. However, being your own boss also means being responsible for every aspect of your business, including planning the budget.
It may not be your favourite topic of discussion, but this is a critical aspect which makes the difference between the success and the failure of your small business. This is why we have prepared a list of useful tips relating to budgeting to help you weather all financial storms and keep your business running.
1. Do: Overestimate Your Expenses
Whenever you are tempted to slice a few numbers off your expenses, reconsider this. It is much better planning for more expenses and being left with some extra money to invest in your business, than to find yourself short of funds.
Also, prices are continually changing and most of the time they are increasing, not decreasing. This is why you should overestimate costs for issues such as your internet service provider, hosting service, electricity, telephone, etc. These are services your business cannot run without, so you cannot afford to remain behind with their payment and risk suspension of service.
2. Don’t: Spend Every Cent of Your Profits
Once you have calculated all your expenses and taxes, what you are left with is your profit. This is the money you have made from your business – your money. Before you pull out your list of wishes, remember that you should always put aside a sum of money for contingencies.
Even if you’ve been dreaming of the latest laptop model or tech gadget for entertainment, resist spending your profit down to the last cent. It is always wise to have some extra cash for unexpected situations.
3. Do: Be Smart in Purchasing
Every product or service you purchase for your business should be exactly what your business needs and at a fair, affordable price. Compare various offers and not just in terms of price, but also in terms of services offered in a specific package.
For instance, instead of choosing traditional social media agencies that you have to pay for every stage of ad design, to have them displayed on the social media and spend time monitoring their performance, you can opt for companies that offer a full package, including ad posting and monitoring to get the best value out of your advertising money.
4. Don’t: Defer Debt Repayment
It may be tempting to pay just the bare minimum on your loans and credit lines for your small business. However, the longer you carry forward debt, the harder it is to run a profitable business. When you add up all the fees and interest rates you have to pay, you realise that your loan turned out to be more expensive than you planned. And while you are tied down to various debts, your business will not be able to grow.
5. Do: Be Flexible
Once you have established your budget, revisit it every once in a while and make changes where they are needed. Maybe you need to add more funds for product development or marketing and promotion, or you have to rethink your estimated profit. This has to be done both for your monthly and your annual budgets. The more flexible you are, the more you are in control of your business and can make financial decisions more confidently.
These five simple tips will help you become a savvier business owner and grow your small business with confidence.