Believe it or not, 90 percent of startups fail.
And to get in the 10 percent of successful business takes a lot of hard work. Knowing how to start a business takes experience and effort.
Some consider that the most important aspect to watch when starting a business is a budget. Because it’s how you survive each day, you need to be an expert on managing money.
Lucky for you, we’ve written this article to tell you everything you need to know about managing your startup budget. If you listen to our advice, you’ll be ready to take care of your new business.
Read on for five tips for budgeting your startup.
1. Estimate Your Income
The first step in figuring out your budget is knowing how much money you will make for the first month. Of course, this is difficult because you have no way of knowing how much income you’ll have.
Despite this, you can figure out a rough estimate with what you do know. Consider the price of your product or service and the demand for it.
For example, imagine that you give haircuts for $15 each and expect to have 200 customers each month. You can assume that you’ll make $3,000 before taxes.
It’s unfortunate that the math is not this simple for a business. You can control the cost, but you cannot know what the demand will be like.
To avoid any negative consequences, you should estimate a low demand. This worst-case scenario will make sure you don’t go over budget.
You might want to consider estimating your income by researching what similar business make. While your direct competition may not help you with this, others might.
Knowing what you think your income will have to be your first step. Before you move on, figure this out.
2. Figure Out Your Startup Cost
Next, you need to figure out how much it will cost to start your business. This is different than knowing how much your business will cost to run.
Startup costs depend on the type of business you do. Construction companies, for example, often need to get permits to start their business. Restaurants need to buy silverware and tables.
No matter what your business is, you’ll have some kind of start-up cost. You may need to buy a laptop and nothing more, but you have to consider it still.
The problem with startup cost is that you haven’t made any money off your business yet. This is where angel investors or your own money comes into play.
While investment helps, you need to scale back your startup costs as much as you can. You will not be able to buy everything you want for your business at the start.
Waiting a few months to buy more can save you valuable money that you don’t have yet. You want your business to be perfect, but it can’t survive if you avoid saving startup money.
3. Know Your Regular Expenses
The next expenses you need to calculate are your regular expenses. These are the expenses you have to pay for on a regular basis.
They can be daily, weekly, monthly, or even annual expenses. No matter what they are, you have to take them into account.
The two types of regular expenses are fixed expenses and variable expenses. Variable expenses are much more difficult to account for than fixed expenses.
Fixed expenses are what they sound like: they stay the same each month. These are always going to cost the same. Here are some common examples:
- Rent
- Insurance
- Loan Repayment
- Employee Salary
- Salary is a fixed income if you do not pay employees on commission. If you do, that is a variable income
- Property taxes
Variable expenses differ because they don’t cost the same amount each month. Some variable expenses are those like the cost of production, credit card fees, production supplies, copy paper, and more.
You should watch your variable expenses each month. After some time, you should be able to know how much you’ll be spending.
4. Don’t Freak Out About Debt
When creating your startup budget, you might have to go into some personal debt. While this is normal, it can still be a stressful situation to enter.
But whether you freak out about it or not makes no difference in how risky the situation is. And if you stress too much, you might not take out enough to run your business.
Instead of worrying about the risk of getting loans, focus on improving your business. The best way to take care of them is to work hard to avoid paying for them out of pocket.
5. Take Advantage of Free Advertising
In the beginning stages of your business, it can be hard to decide how to advertise your business. Finding the money to do so can seem impossible.
This doesn’t need to be such a worry though. You have plenty of options to get your name out there for free.
One free advertising option is to start a blog with great Search Engine Optimization (SEO). This makes sure that people see you when they search Google.
When writing a blog, think about what people are asking about your field. Then, if you can answer that question, and you’ll soon see traffic on your site from Google.
Also, make sure your business is on every form of social media. This is a great way to find potential customers around you.
Having a social media account is not enough though. You need to post on a regular basis with good content. Otherwise, you may end up hurting your business.
Using these free advertising options will help you get the exposure you need. Then, you can later use more traditional forms of advertising.
Ready to Get Your Startup Budget Going?
Now that you know how to manage your startup budget, you should be ready to take on the difficulties. While it might be hard in the beginning, remember that you can’t succeed without trying first.
Did you like this article? Check out our startup life blog for more. If you’re ready to get your business started, contact me for professional consulting.
