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Planning Your First Budget? Here Are Some Top Tips For Small Business Owners

Posted on 4 January 2021
Web Design West Midlands - Freecom

Opening a small business is an exciting and scary prospect. However, the sense of overwhelm may only hit when the owner is preparing their first month’s budget. An experienced individual who opens a small business might have insight into how to draft a reasonable budget, but even then, there are things that they won’t know. The unknown values are what makes a business’s first budget such a terrifying thought.

Fortunately, other small business owners have gone through similar struggles and are willing to impart a bit of their knowledge. These 15 experts from Forbes Coaches Council share a few tips for small business owners about how to plan their first budget smartly without giving in to fear and anxiety.

Forbes Coaches Council members share their top advice for business owners creating their first budget.

1. Be Mindful Of Your Startup Costs

A first-time business is often started with emotions—it could be anxiety, enthusiasm, impatience, pride, over/underconfidence. These might spill over into unnecessary spendings, like fancy equipment or software or high-quality brand investments. Don’t let your new identity dictate your expenditures. Consult peers to get an objective view or recommendation on things. – Lin Tan, Collective Change Institute Pte Ltd

2. Hire An Accountant

I was a CPA when I started my coaching business, but still needed help from one! CPAs can have access to ratios and percentages that are typical for certain industry budgets. Sometimes you can find those from a book. Most often, though, it pays to hire an expert to guide you through your planning. That way, you can focus on what you are good at with more security. – Roberta Moore, The EQ-i Coach

3. Forecast The Unexpected

I have seen it many times that small businesses “guesstimate” costs but then find themselves way off. Sadly, this often means they have more to pull out than they expected. Make a list and ensure you haven’t missed anything from it. – Rebecca Patterson, Rebecca Patterson

4. Plan For The Worst

Talk to experienced experts in your field and determine both the fixed and variable costs you can expect to see on a monthly basis and have at least six months of operating capital before you launch. The COVID-19 crisis provides an excellent lens into financial preparation, and the observations leveraged from the experience of others will provide us with tested planning guidance for the future. – Dennis Volpe, LRI

5. Feel The Fear

Organizing a budget can be overwhelming the first time—will you meet your goals, are your projections accurate, etc.? The advice I would give is to confront the fear associated with all of the unknowns and expand your risk tolerance. – Jennifer Helene, Purposeful Ventures, LLC

6. Do It Three Times

First-time small-business owners think big. It’s the nature of an optimistic entrepreneur to overestimate income and underestimate expenses for their initial budget. I recommend revising the numbers of the dream budget to be more conservative. Then walk away from budget No. 2 and come back one more time even more conservative. This strategy will make for a far more realistic budget in the end. – Rick Itzkowich, Vistage Chair San Diego

7. Remember That Less Is More

I overpaid for so many services when I was a new entrepreneur. I quickly burned out, went broke and had to completely change my strategy. Now my budget is bare-bones so my revenue is mostly profit. No matter how much I make, I keep that strategy in place because I have made the painful mistake of overspending on my business before and I know better now. – Shereen Thor, Awaken The Rebel

8. Know That A Budget Is A Living Document

Too often, new business owners think their budget has to be perfect—especially the first one. Budgets are built off historical performance and planned activities, but with a new business, you’re pretty much guessing. Know that the budget can adjust monthly and it’s a tool to know where you need to adjust. – John Knotts, Crosscutter Enterprises

9. Get Clarity In Your Values

What you value most in your business must be reflected in your budgeting efforts. As a first-time small business sometimes you may be bombarded with tasks and the to-do lists that do not measure up to what is really important. Let go of the busy work and focus on what is a priority and what is fundamental. If in your business you value people first, then budget with this in mind. – Adriana Rosales, Adriana & Company™ LLC

10. Set Strategic Priorities

The technical process of establishing a budget may not seem very sexy or exciting, but it absolutely should be strategic. Remember that your budget reflects your priorities, your values and clarifies the value proposition that you plan to bring to the mark—all of which is pretty exciting! So don’t be afraid to dive into the budgeting process and ask for help with the technical stuff. – Jonathan H. Westover, PhD, Utah Valley University & Human Capital Innovations, LLC

11. Stay Disciplined

Keeping your financials aligned is key to small business success. Keeping personal and business expenses separate is important. This will give you accurate records and data to support future value and opportunity. Remember to track the costs you incur in doing business. As owners, we often forget to include our activity as a business expense. When in doubt, ask your CPA. – Lori Harris, Harris Whitesell Consulting

12. Remember ‘Cash Is King’

It’s easy to start a business with overly optimistic projections. As a result, many fail to reach profitability as soon as projected and run out of cash. So, do scenario planning with at least three trajectories mapped out: optimistic, realistic and pessimistic. Ensure you have a financial plan, and cash, in particular, that will sustain you through even the most challenging scenario. – Chuck Ainsworth, Center for Creative Leadership

13. Be Old School In Terms Of Budgeting

Do not look for fancy tools. Be old fashioned with it. If you do the hard work, you learn a lot for the future. Think about these categories: income sources (e.g. earnings, loans), fixed costs (e.g. rent, cell phone), variable expenses (e.g. advertising, printing services), one-time spends (e.g. equipment). Next, hire an expert and discuss your ideas with them. Last, be flexible and revise it monthly. – Inga Bielińska, Inga Arianna Bielinska Coaching Consulting Mentoring

14. Put Yourself In The Budget From Day One

Owners have been taught to sacrifice for their business, even to delay compensation in favour of more “essential” expenses. But until you are paying yourself a market-accurate wage plus industry-standard profit, you have a hobby, not a business. Find another way to ease cash shortages than shorting yourself. Remember that creating ROI is your top responsibility. – Dodie Jacobi, Dodiodo Inc.

15. Don’t Forget About Marketing

The best thing a new startup business can do in their budgeting strategy is to budget for marketing. While it may seem like money could be used in different areas, you have to see budgeting for marketing as an investment and not an expense. Marketing lets people know who you are and what you do—budget well for it and invest in your business’s future.

Original Article By – Jon Dwoskin, The Jon Dwoskin Experience

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