Your business’s budget is unintentionally determining and influencing your whole business plan, which is exactly what we’re going to cover in this article but not before actually clarifying why you need a business budget and how it can help you.
Why you need a budget for your business?
Although it might not seem so, keeping an accounting of your business’s budget can be a factor for your business’s future success. As experienced business owners often say, a budget is more like a tool that you can use to understand and determine what you can really afford to do and what you can’t.
A budget tells you what choices you can realistically consider, what are your limits when talking about an offer and most importantly, a budget is the starting point of seeing the big picture of your business and building a strategy for great scalability and profitability.
In addition, a budget will alert you whenever you spend too much, will minimize the chances of getting in debt, and finally will allow you to make a spending plan for your funds.
The main components of a budget include gross income, expenses, net income, overhand and production costs, rents, direct labour budget, and monthly-annual projection totals.
#1 Create a business plan
Creating a business plan goes before everything as without a plan there is no strategy, therefore, no managing, no schedule, no product, no clients, and therefore no business. The business plan is mainly made of a development plan, a marketing plan, and last but not least a sales plan.
Keep in mind that all these plans are long-term strategies focused on sustainable growth and planned with specific, clear, and realistic goals in mind.
The basic template for your business plan includes:
- Targeted niche- You’ll have to study your market, competitors, customers, and most importantly be able to find opportunities for you to take advantage of and fit in the market. Find a specific niche/market and try targeting its most reliable and profitable customers.
- Funding plan- Decide how you’re going to fund your business expenses/budget, find out how much capital you need to achieve, look at your current capital and work out some way of getting the necessary funds.
- Expected income- Project realistic profit, cost, and income margins and then use the result data to establish short-term and long-term financial goals.
- Sales and marketing plans- By knowing your overall budget and your final profit goals, plan a sales strategy that will project results solid enough to both support your business expenses and bring some profits too. Once the sales plan is done, develop, and shape a marketing strategy after that specific sales plan so that the marketing matches your products and services. In other words, work out a marketing strategy perfectly able to achieve your expected conversion rates.
- Team and business needs- Evaluate all of your business needs, including your team needs, and based on your funding plan determine how much you need to pay for those needs and make sure you cover all of them.
#2 Analyze your main competitors using different tools
Identifying and gathering information about your competitors can single-handedly help you overcome them and come on top of the market within just a few adjustments. Since we live in a time when information means power, there are many ways you can get that information and use it for your benefit. By checking simple data such as identity verification, debt collection, or fraud avoidance, you can easily determine someone’s strengths and weaknesses and adjust your business accordingly so that you can beat them and take off the market.
Now, speaking of what tools exactly to use that also has all of the above-mentioned features, Spokeo has been proven to be one of the best tools in terms of competitive analysis, marketing mix, and traffic information. Spokeo is a people search engine mainly designed for handy features such as an email search tool and phone number search. With Spokeo, you could find someone’s number, email, address, and even photo from various online or offline sources. Reverse number lookups allow you to speak with your competitors directly and ease the whole process of getting to know them well significantly.
You could also use tools such as Ahrefs to deeply analyze your competitors’ website weak points, SEO issues, and site traffic and use that information in your benefit.
#3 Estimate your business expenses
Part of the funding plan, measuring expected business expenses requires a whole other paper folder since they vary month by month or even week by week. That said, however, there is a common list of expenses for start-ups that you might consider following and estimate your business expenses.
Overall, the pattern of expenses includes licenses and permits costs, inventory costs, equipment and supplies, utilities, employee salaries, marketing and advertising, office rent, insurance, market research, website maintenance, and general business maintenance costs.
#4 Estimate your monthly sales
Along with expenses, you’ll have to make a very educated guess on your average monthly revenue so that you know what goes between those sales and expenses. Now, without having any previous record of sales, it would be hard or even unadvisable to estimate your monthly revenue just by looking at your prices and picking the least amount of customers per day possible. That said, you’ll have to take other, safer approaches that will help you make a better forecast and adjust your business plan properly.
The first and safest way of forecasting is by looking at all the information you’ve gathered about your competitors before and calculate the average revenue they get. Then, subtract the additional number of employees and volumes per employee they got over you and divide the average revenue proportionally to that data to estimate a realistic revenue amount for your first month. Considering you will have a lower brand-awareness and poorer marketing, you could also adjust the final amount accordingly so that you make sure the forecast is not too cocky.
#5 Get investors to cover your budget needs
In case you still are not able to meet your minimal budget goal, perhaps the most advisable solution for the problem is getting an investor or sponsor to at least support you for the first couple of months until the business gets on its feet and is able to grow on its own. Although you may have to pay a significant profit share later on, always consider the fact that without investors there would be no budget and therefore there wouldn’t be any business. Investors are always interested in start-ups as they are constantly looking for small scale investments with the biggest return possible. Getting an investor is an opportunity both for you and for him, which is why you shouldn’t hesitate and find one as soon as possible if needed.
Maguire Haigh is a content marketing manager for Spokeo. He is an expert in the business sphere. He prefers writing articles on marketing, social media presence, travel, and startup topics. Maguire has great experience in traveling and deep knowledge of 5 foreign languages.