How To Create A Business Startup Budget
December 13, 2021
How do you create a business startup budget?
- List down your launch costs
- Figure out your fixed expenses
- Estimate your variable expenses
- Predict your monthly income
As a new business owner, it pays to be knowledgeable about money matters. Knowing how to create a business startup budget is a big advantage, even if you don’t need bank financing. It will help you be aware of how the money moves within your business and what changes and adjustments you need to make.
It’s important to think about the necessities of your business when trying to create a budget. It goes without saying, but businesses have different needs and therefore need to make unique budgets. Startup owners, having no prior experience to draw upon, often find this task daunting. To help you, we’ve created a guide on how to make a budget for startups here. Keep reading to learn more!
List Down Your Launch Costs
Launch costs quite simply refer to the expenses it would take for your business to launch. There are quite a few to consider before opening your doors to the customers. In your budget, you can classify costs into four categories: facilities, capital expenditures, materials, and other expenditures.
- Facilities: These are costs that you need to set up the location itself, be it a store, a warehouse, or an entire building. It includes leasehold or tenant improvements, in case some changes are needed for the structure.
- Capital expenditures: These are for material assets that you need to run your business. Some examples are furniture, equipment, vehicles, and necessary machinery.
- Materials: These costs are set aside for things like office supplies and advertising or promotional materials.
- Other costs: These are situational costs that you need to settle before opening the business. Some examples are accountant fees, licenses and permits, and legal fees.
Make sure that you note all of these in your startup budget, especially those that will help you get a loan.
Figure Out Your Fixed Expenses
Fixed expenses, or overhead costs, are business expenses that remain the same each month. It’s important to figure out all the fixed expenses your startup will have to incorporate into the budget. Here are some of the common expenses that startups have:
- Payroll and benefits
- Credit card fees
- Business insurance
- Website hosting
There are more possible overhead costs, and they depend on each business, so try to do proper research on fixed expenses that your business will need.
Estimate Your Variable Expenses
On the other hand, variable expenses are those that don’t stay the same each month. The value of these costs relies on several factors, making them constantly change. Some examples of variable costs for business startups are:
- Postage and shipping costs
- Raw materials
- Production costs
- Freelance services
Depending on your business, not all of these will apply to your startup, and maybe some are not included in the list. In building your budget, gathering information is important.
Predict Your Monthly Income
Now, you have to try to predict what your monthly revenue will be. You should normally base your projections on past data, but as a startup, you don’t have any.
The best approach is to create an optimistic projection and a conservative projection. Then, create one that’s just in the middle, and use that to show your lender. Once you start operations, remember to create cash flow statements each month.
Now that you have a better idea of how to create a business startup budget, your startup should have an early edge in its growth. Remember to use a good accounting software program or spreadsheet program to organize your budget. With a solid budget coupled with a good business plan, a business’s success will quickly come.
Business startups are tough endeavors, and many people quit before they even actually begin. That’s why Benito T. Keh endeavors to use his entrepreneurial expertise to help those who wish to enter the world of business. If you’re interested, you can contact him and he can help you set it up!