We all budget in our head, we think that we have $500 so we can spend $450 on that, then $50 somewhere else. But the biggest thing is having it written down on black and white then printing it out. (I do my budgeting in excel).
There are a few things that I do with my budget to make sure that my business is going to be operational and I can plan and tightly manage my financial performance for my business. If I'm not tightly managing, what will basically happen is that my business will fall apart. Isn’t that fun?
Everyone says it's going to fix your business if you make sales. Well guess what, even if you're making sales and you're spending twice as much on expenses you're not going to ever go anywhere.
It's important to create a budget that's an easy process and effective way for you to keep your business and finances on track.
1. Tally your incomes.
I always get excited for this and it's a fun part to do. You can see where you are at.
A lot of businesses have multiple levels of income coming in. You have done for you services, packages, a consultant; whatever it is, you have multiple stuff coming into your business or coming in under your brand. This needs tracking.
You want to literally write all of those out, in every single way you can possibly make money.
Sometimes you have to get real with yourself, it's income you KNOW you have coming in not the “potential” income.
You can't count in the "I'm going to sell $1,000 this week". Otherwise at that point you're just guessing and your budget isn't actually going to be a budget. It's going to be a "hopefully this works".
Comment below if you need help figuring out your income sources, I am more than happy to help you with this. I've even got a template.
2. Determine your fixed costs.
This hits on your expenses. You need to know how much you're spending in your business and in your personal life.
On my desktop computer I have an in excel sheet for my house budget (us as a family) and then I have an excel sheet for my agency budget.
They go hand in hand because I own my business. If my business brings in money, I get money.
It's really important that you know how much money you're actually making so that you keep living and prospering.
In determining these fixed costs you have to think about everything.
Now what I recommend is going back at least 6-months on the credit cards that you use for your business. I would recommend having a dedicated credit card and business account (checking) for your business at the very least. In determining your fixed costs go back and write things out.
I have two credit cards, a business checking and savings account.
Why do I do that?
It makes accounting so much easier. I pay someone to do my accounting but when I was doing it, I was looking for transactions. I had 8 different cards etc, that's a big no!
? Tip: One checking, one savings and at least one credit card for your business.
The reason I recommend a credit card as a business owner is because it will cover you in those moments when you realize you don't have enough money. You might want to take this course at $1,000. It's a business expense, but yet you don't have the thousand dollars in your business checking at the moment.
This will help you really determine how much you're actually spending. When I did that for the first time in my business, I was floored. I was just spending money, which is my life story, but it completely opened up my eyes on how much I was actually spending.
In order for your business to be profitable, you have to have that number be lower than the income number. Sometimes it means cutting some stuff. Every now and then I go through and I just cut out programs that I haven't used in the last 30 days. The programs will always be there, I can always re-join.
Got your incomes together?
3. Include your variable expenses.
These are things that you probably don't even think about.
Girl, when was the last time you went out for coffee? Did you see that was a business expense? You probably should because if you were there for coffee, that probably means you took your laptop or phone out to work.
Make sure you're including those variable expenses.
Variable expenses include:
These are items that are going to change depending on how much you sell or what you are doing that month.
If you have a VA (virtual assistant), admin or people that actually do extra stuff that white label make sure you're including their pay in this. This is vital. I put their name, what they do (for my own reference), and how much I will be paying them for that month.
Until now you have 3 different sections and you have listed them out.
4. Predict the one-time expense you are going to have.
At the beginning of every month, usually the 1st day I sit down and predict my expenses for the whole coming month. I sit down and answer certain questions:
These are all 1-time expenses that you're never going to have them again. But at the same time, they're tied to something specific.
Other examples of 1-time expense:
Look at what you are doing in the coming month and make a list of any 1-time expenses you think you might have.
5. Put it all together.
This is so vital and very important.
It takes a little bit of excel or Google sheets knowledge.
You can Google it. It's not hard, but it's a formula.
This formula allows you to see and to MAKE SURE you are not negative. You should be making a profit. Isn’t that what we are all here for?
That's where your profit comes in. When you have to go and pay taxes and they ask how much your business is making, they are referring to this magical word "profit". You want to make it positive!
You want to make it a good amount positive, not $10. If it's only $10 positive, you've got a problem and you need to look back and address the matter.
This is where the age old saying of sales will help your business is going serve some truth.
You might have to cut expenses.
But the key is to look at your totals. Total expenses, income, variables, 1-time predicts and your payroll.
Then you could add it all together and see if it comes out to a positive or negative number.
If it's negative, look at what you can change.
All of that matters. At that point you know where your business sits and what you need to be prioritizing for that month.
Now if it comes out to those positive numbers, great! But sometimes it doesn't. Even for me, every single month is just a little bit different in my agency.
Every single month I have to make some choices thinking how are we going to do this? It's just part of the process.