As a small business owner or as a start-up, running your business without a budget is a risk you don’t want to bear anymore. The term budget seems ambiguous, however, I am here to simplify it for you and take you through an easy guide to creating your own budget.
A budget is that document that helps you estimate or compare your expense to your revenue. It equally help you as a small business owner to know whether you have enough cash in hand to run your daily operations, grow the business and generate revenue for yourself. A budget helps you to avert the risk of spending more than you are earning as well as not spending enough money to expand the business.
Some of the key constituents or make up of a budget that a business owner must never leave out are: rent or mortgage loan payments, utility bills, payroll expenses, cost of goods sold expenses, tax payments, cost of raw materials, marketing/advertising, logistics/transportation, office stationeries/equipment, insurance and interest payments on loans gotten.
Having known what makes up a good and functional budget, what then are the steps to creating a sustainable budget
It is very important to do some local research of your industry or sector so as to have an idea of the percentage expected revenue and how it will be allocated to various cost groupings.
Have a Spread sheet:
You need to make an estimate of what the total Naira amount and percentage of your revenue will need to be allocated toward raw materials and other costs on a spread sheet.
Create some Lax:
As much as you want to assume an estimated expected revenue/income or probably some expenses or costs would be fixed or managed, it would do well to note that these assumptions are not cast in stone, hence the need to create some lax or try to ensure that you have enough money either in hand or expected before taking further steps in your business.
Cutting cost yet retaining quality and credibility of your business must always be a part of your budget. Always seek to cut cost. This will help you to maximize profit and expand your business as well.
Because of business volatility, small business owners must periodically evaluate their plans, strategies and expense as any unexpected surge in any of these could erase revenue assumptions. Also, shop around for new suppliers or on other services to save money.
A business budget helps you as a small business owner to know whether you have enough cash in hand to run your daily operations, grow the business and generate revenue for yourself.
The goal of budgeting is to help ensure that there is enough cash to keep the business running, expand the business, and rise against competition as well as solid emergency fund.
Below is a vivid template of a typical business budget:
When figures are inserted into the table and necessary calculations done, you will have an overview of how much it will cost you to run your business.