In order to put up a small business that has good odds of being financially prosperous in the future, having a solid budget for it is an absolute must. Bert Seither, The Startup Expert™, explains the types of expenses and revenue to consider when assembling this plan to determine how much money you’ll need to succeed:
1. Infrastructure expenses
The infrastructure of a small business usually refers to where it is based and its overall operations. Will you maintain a home office? Will you rent out or purchase property in an office complex or retail location in a shopping center? Infrastructure and overhead costs could be quite low if you conduct your business from home. On the flipside, they might be much higher than you’d think if you go with a different location. It’s often best to start small in a home office and then set your sights on something bigger once you see a substantial cash flow rolling in.
2. Costs of materials/equipment
The physical materials or intangible services you utilize to run your business are essential to offering the best line of products and customer service you possibly can. For example, you may need a desktop computer, a printer, a sewing machine, or a subscription to a virtual office service. In addition to these expenses, there are also those required to cover the costs of producing various products or services that you actually sell to your customers. This category of expenses normally fills the cornerstone of a budget. If you don’t have the funding for all of this, it may be best to proceed cautiously until you’re standing on solid financial ground.
3. Marketing/advertising costs
The Startup Expert™, Bert Seither, points out the importance of expenses tied to getting the word out about your small business. You could advertise online with Google AdWords. You could purchase ad space in a local newspaper or magazine. You might even find it fun to have a professionally produced radio commercial air on some radio stations in your market. Regardless of which methods you select, calculate how much it will cost you and proceed accordingly. Never forget about word-of-mouth referrals, though, which are a rare form of 100% free marketing.
4. Payroll expenses
Will you have an office staff? Independent contractors? Virtual employees? Or will you be a one-woman show running the entire ship? Whatever your current or future situation entails, don’t forget to include payroll in your budget. The amount you pay anyone for work purposes should be competitive, but it shouldn’t break the bank, either. Compensate others who can complement your skills by assisting you with tasks that can help make you money. Be sure to consider benefits, health insurance, and any other expenses you may be on the hook for when compensating employees.
5. Revenue projections
While you might immediately think of expenses as the focal point of a budget, you certainly cannot forget about factoring in your revenue as well. You’ll need money to cover all sorts of costs, and the only way to get it is through the income streams you create through your enterprise. Make reasonable profit projections about how much revenue you could generate in 4 months, a year, or even a few years into the future. Bert Seither, The Startup Expert™, recommends accounting for the costs of your products/services to determine these amounts.