Your business is beginning to thrive, and as your cash flow increases, your finding that at the end of the month you have more than enough left over, but you are not really sure whether or not you are maximising your company’s earning potential. On the front burner, you have pressing needs as it relates to the everyday operations of the business. On the back burner, you’re still rolling over in your mind whether you want to give your overworked assistant a raise, in addition to making sure you budget enough for her vacation and yours.
Funding your venture was easy compared to actually allocating the money in a way that is most productive for the business and an in a way that allows you to operate on more than a shoestring budget from month-to-month. Allocating money to a start-up is made further difficult by virtue of the fact that you do not have a prior budget to create a current one. However, you can actually create a sensible budget for your business without the worry.
For tips on allocating funds for that exciting venture you are starting, continue reading below.
Determine All of Your Expenses
Informally, list all of your monthly business expenses. These expenses usually will include money allocated for office space solutions, for office equipment, staff, and insurance. Then, prioritise this list writing down which items are needs and which are wants. By creating a list, you become aware of how much money you are actually spending in a month, and more importantly, you only spend on what is needed.
Draft a Budget
Avoid a leap before you look mistake by drafting a budget that includes all of your fixed and variable expenses in a month. Fixed expenses are those that do not change, i.e. rent, cable, and internet. Variable expenses fluctuate, for example, your utility bill. Not that one expense is more important than another, but creating a budget will give you a visual picture of what is available to spend over time, whether your budget is monthly or yearly. When creating a budget, remember that you are establishing a business, so plan with that idea in mind.
There are several programs that will allow you to create a spreadsheet that itemizes your expenses. One column should be labelled projected budget and the other actual budget. Taking your list of expenses and these figures, fill in your spreadsheet with your projected budget, and as you budget monthly, track your expenses and make comparisons. Because there is no track record with start-ups, you will have to use your projected budget to navigate your spending initially and then modify your budget monthly.
Find Ways to Lower Your Monthly Overhead
Right now, you might be self-employed or a small business owner, so you might have to cut corners. Before allocating too much money to renting office space, one way to lower costs is to consider alternative office space options like the virtual office or co-working spaces. Most conventional office leases in Australia’s major cities require at least a year’s commitment, and these leases typically do not include amenities (water, utilities, cable, and internet). Alternative office space solutions help reduce your fixed monthly overhead but also are flexible enough to allow you to grow when your business grows without the extra expense.
Another way to lower your overhead is to lower travel costs. Again, a common practice is to invest in video conferencing technology that will over time save your travel budget. This technology will allow you to connect with people in other locations without having to make an unneeded trip.
Funding that First Venture
Really, your allocations will depend on the function of your business. Some businesses require extensive travel, and so much of that money will be budgeted for those types of expenses. Other ventures like technology start-ups rely on top of the line equipment, so as an entrepreneur, you would naturally spend more on technologically advanced equipment. While budget allocations are coloured by industry profile, your budget will be based on your business’s needs.
