10 Guidelines to Help Budget Your Business to Financial Success

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Jean L. Serio

Mention of the word "budget" can clear a room full of business owners as quickly as someone yelling the word "fire!" And quite frankly budgeting is boring; not the creative stuff that excites. Yet, when all's said and done, a simple budget -- faithfully adhered to -- can and will put your business on the road to financial success.

Bottom Up vs Top Down Budgeting

Many experienced business owners like to use the "top down" strategy of budgeting because it looks better on paper. Making great fodder for potential partners or investors. "Top Down" means looking at the overall picture of your business, your product or service's share of the market, the price of products or services, and the growth factor.

From there, you extrapolate, or predict, what you can budget for each type of service or product your business needs, including fixed expenses. Because this is based on your market projections, it's often inflated. Appearing as though your business has greater financial ability to spend. In short, you don't get real numbers with this strategy.

While the "top down" strategy aims to impress, the "bottom up" strategy gives you actual numbers to work with. Making your budget more sensible and useful. Anyone in business at least six months, can begin to determine, from experience, a sensible budget for things like:

Office, restroom and cleaning supplies; cash register and credit card supplies; paper bags, gift boxes and tissue paper; shipping supplies; and other needs.

Beyond that, you'll eventually have an advertising and PR budget. And once you've determined the amounts you'll need for each of these things, "shopping around" for the best prices should be your next project. To help keep your budget on track.

Regardless of the product or service you need, it may surprise you to know you can get the best price for almost any services or products needed to run your business if you'd take time to "shop around" to see what's available. Before purchasing the first product or service you see. As any woman shopping for her family knows, money not only goes farther when you shop around, it often allows the purchase of products and services originally considered out of reach.

10 Guidelines for Budgeting Your Business to Success

Plan to negotiate for most things, even when it appears a company doesn't.

In the long run, buying in bulk is always much cheaper.

Although some would disagree, purchasing auto service plans and warranties can often save you money.

If the company who underwrites your home and vehicle insurance policies is capable, have them underwrite your business policy, too. Prices are usually lower when the company carries all your policies.

Order and purchase items you need during "sales".

Keep a reserve of office, restroom and other necessary supplies, you've bought in bulk, so it's not necessary to run out and buy one item, at a much higher price.

Shop around for better prices for services such as: business credit cards, banking, computer and equipment repair, trash pick-up; printing, and more.

If it's sensible, shop around for used furniture or display items. Many charitable organizations have donated items in near-perfect condition, which will often work just as well as newly purchased items. Or, shop at going out-of-business sales.

Save time, gas and money when organizing errands.

Although some will disagree, often money can be saved by purchasing a service agreement or warranty for business equipment. When you're in business long enough, equipment will eventually breakdown and need repair. Pre-paying, for even a portion of that, can put you money ahead.

Totaling your usual expenses

Once you know your costs, write down the amount beside each item. Now determine which items you can do without, and cross them off your list. If some items seem too high, perhaps it's necessary to shop around again to get a lower price. For instance suppose you'd like music piped in, but on second thought it's too expensive, cross it off your list. Now add in fixed expenses, like rent, insurance, taxes, and write down approximate costs for utilities like phone, electricity and gas. All of these items will now become your usual expenses. Add them all up and you should have an approximation of how much your usual monthly expenses will be. But this total doesn't yet include the purchase or manufacturing of products you'll sell.

Calculating manufacturing and purchase of product expense.

Are you manufacturing or creating a product. Add up everything it takes to make one item. For example, fabric, tools, plastics. Hopefully you've shopped around for the best prices for those items. Once you've added up what it takes to make that one item, then add the hourly rate paid to an employee to produce it, plus the commission paid to a salesperson who'll sell it, and any advertising expenses to promote it. Take that total and multiply it by the amount of products you hope to sell monthly (i.e. 48, 60, a gross). This gives you the amount necessary to produce, sell and advertise those items.

On the other hand, if you're purchasing pre-made merchandise you'll sell, first, look through your catalogs. Decide what you want and write up a list of everything you think you can afford, including number of items to be purchased and price. Some companies give price breaks when you buy, for instance 12, 24, 36. It's always best to buy in quantity in order to receive those breaks. That done, add up the totals. If the amount is more than you can afford to spend, go through the list crossing off items.

Calculating income needed to cover your budget and run your business

Now add the total of "usual expenses" to the amount needed to either manufacture or purchase the items you'll sell. This is the amount of income (sales) you'll need to have, to cover those expenses. Income, over and above payment of all expenses, is profit.

Calculating income needed to cover your budget and run your business

How much income will your business make to start? When will sales take off, cash begin flowing steadily into your business? Answers to these questions will come with time and experience. However, it's best -- as lenders and investors say -- to have enough money to run your business and live on for twelve months.

Budgeting your way to success

While business budgets aren't the most exciting part of running your business, they are the bedrock upon which your business is formed. Without them, you're often wasting money on products and services your business doesn't really need, nor can afford.

Putting a budget together can be a challenge. But once set, it can better help you forecast your business's future. Plus, you'll know where you're going. Or be quickly able to tweak the budget to redirect the business.

And P.S. There's even budget software out there. Check it out.

Jean L. Serio, Copyright 2006. Are you one of the 1.2 million women tired of working the 9-5 grind, sick of worrying about making ends meet? As you know, starting your own business still remains one of the best strategies for providing you financial freedom. Discover how to start your own business today, and receive your own simple, step-by-step Action Plan. And to ensure you receive all the details FREE, and learn how you to harness the power of other successful women plus receive hundreds of essential resources needed to start, first sign up for your Free "Women Start Up a Business" Ezine. And receive your Bonus Report "5 Mistakes Women Make Starting Up a Business". Go to: www.womensmarketingandbusinessnetwork.com "We help you make it happen!"

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