5 Basic Steps to Create Budget for a Startup Business

One of the most difficult tasks in creating a start-up business is drafting the business budget. However, once this is done, it simplifies the entire process of running the business. This is because the business budget acts as a foundational framework for the financial breakthrough of the business. As such, it is the basic tenet of any business that aims to succeed. However, the way you create a budget for a startup is different from the way you create a budget for a business currently on the run. Based on this, this article examines the 5 basic steps to create a budget for a startup business.

Have a target 

The goal of creating a budget is to have a targeted amount of money you would spend on the business for a given period of time while ensuring that you cut off unnecessary expenses. This is why the first important step to creating a budget is to have a target. Why do you want to spend the money on the things highlighted on your list? How does getting these things to help you to achieve your big business goal? These questions help you to cut out things you think you need but don’t necessarily need. 

Also, some of the tools that can help you in streamlining your budget plan are MS Excel, Google Sheet, and accounting software. 

Note: Never forget to set aside an emergency budget. Also, your budget should last at least for a space of three months. Recreating your budget after 3 months helps you to include the necessary things you might have excluded in the previous budget.

Create your income list

Do you intend to work with the little money gathered from the first few sales, or do you have money saved to finance the business until it is strong enough to carry its own burden? Or are there investors interested in working with you in your business? Defining the source of the income gives you an idea of what you should include in your budget and what to postpone to later.

Categorize your budget

Here is an important aspect of budgeting that shouldn’t be handled with levity. Divide your cost into capital and expenditure. Your capital entails your landed properties and business equipment while the expenditure entails your expenses. This method of categorizing helps you to keep track of your returns. 

Determine your fixed cost

Fixed costs are business expenses that usually remain the same for a long period of time. These expenses include

• Payrolls and benefit
• Rent or mortgage
• Website hosting
• Business insurance
• Internet and phone services
• Bank fees
• Professional services

Your budget is incomplete without a plan on how to attend to these expenses.

Determine your variable cost

Unlike fixed cost, variable cost fluctuates over time. This time of cost does not have a fixed value. However, whether or not the prices fluctuate, making provision for them in your budget is very essential, as they are needed for the smooth running of your business. 

• Raw Materials
• Advertising bill
• Utility bill
• Freelance service bill
• Shipping bill etc

Good budgeting equals better business. A business with a great budget structure is able to take care of the paramount needs needed for the smooth running of its business. According to Victor Butcher, of Butcher Financial Services in Memphis, Tenn., a former president of the Tennessee Society of Certified Public Accountants’ Memphis Chapter who advises small businesses,  “A budget works on common sense.” “If you made $100,000 last year in revenue, common sense indicates you won’t make a million next year. Your best off estimating in the range of $80,000 to $120,000.” However, ensure your business budget is flexible enough to make changes. 

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