Are you preparing to launch a new business? Whether you’re just about to start an entirely new business or want to expand your existing company, budgeting is one of the most important steps for any entrepreneur.
Before you leap into entrepreneur mode and start developing your business, follow the 13 steps below – provided by UK business finance experts Corporate Recovery Help – to make sure your company has a realistic budget prepared ahead of time.
After you review the below steps. make sure you check out the handy infographic on how to create a budget the bottom of the post.
How much will it cost to launch, run and grow your business? The first step in any business budget is researching the costs involved in the business. Be realistic about your business’s costs to avoid any surprises once you start taking action.
How much revenue can your business generate? The second step in preparing your budget is to calculate how much revenue your business is capable of generating and the extent to which it can grow.
Figure out gross profit margins
How much of your business’s revenue can you keep as profit? Work out your gross profit margin by deducting the costs of running your business from the amount of revenue it generates each month.
Create a 12-month cash flow projection
How steady will your business’s cash flow be? The fourth step in creating a budget for your business is working out how steadily cash will flow into your business from its customers, clients and partners.
Adjust for unreliable payers
Is your business prepared for unreliable payers? Prepare for missed payments and other financial setbacks ahead of time so that your business is ready if a customer fails to pay their bills as they come due.
Adjust for seasonality
Does your business sell a product or service with seasonal demand? Work out how seasonal changes to the level of demand for your business’s product or service may affect its cash flow throughout the year.
Adjust for economic and industry trends
Does your business sell a product or service for which demand is growing or one for which demand is decreasing? Look at industry and economic trends to determine if your business has a viable or difficult future
Decide how to spend
You’ve worked out the costs of starting and growing your business – now, how will you spend your budget? Work out how much you need to spend on certain items or services so that you’re fully prepared when it’s time to start your business.
Discuss costs with suppliers
Can you get a better deal on certain products and services by negotiating with your business’s suppliers? Talk to your business’s suppliers to learn how much you need to spend to get your business off the ground and growing steadily.
Discuss expenditure with department heads
How much cash does each part of your business need to operate successfully? If you need to spread your budget between several departments, this is a great time to talk to department heads and learn more about their financial needs.
How should you spend the money your business generates? Step 11 in the process of preparing a business budget is working out how you’ll spend money to fuel the growth and development of your business over time.
Create a contingency plan
Is your business prepared for financial setbacks? Your budget should have a detailed plan of action that you can use to recover from financial issues or deal with a missed monthly or quarterly target.
Plan regular budget reviews
The best plans don’t stay the same over time – instead, they keep developing as the situation changes. Plan regular budget reviews – once a quarter is a good idea – so that your business is always 100% in control of its financial direction.
Insure your business You’ve put in all the research and hard work, it would be a good idea to insure your investment with a general liability insurance policy to protect that investment so that no unnecessary problem arises.