If you’re building a small business, you’ll need to think seriously about your budget. For many start-ups, every dollar counts as the s...
If you’re building a small business, you’ll need to think seriously about your budget. For many start-ups, every dollar counts as the stats tell us that around a third of new companies bust within 2 years. While this may sound very daunting, it’s possible to avoid this kind of failure by planning carefully. The best way to protect yourself is to be careful with your finances and to follow a strict budget. In this article, you’ll find some essential tips that will help you put together a solid financial plan. By taking note of each point, you can avoid the pitfalls of small business finance - whether your company is at the beginning of its life or a number of years in.
Consider Your Own Wage Carefully
Once you run your own company, it can be tempting to give yourself a nice juicy paycheck right from the start. However, this can be a mistake - especially if your business runs into unexpected expenses. Furthermore, if you’re on a considerable sum, you’ll obviously be required to pay more taxes along with other charges. If you’ve recently had to take out public or private student loans, for example, a big wage will see you paying that back in large chunks that can be hard to afford. At the same time, don’t pay yourself next to nothing. If your business can’t properly support you, you’re far more likely to throw in the towel early. Many directors prefer to give themselves a living wage and then pay themselves dividends from the profits their company makes.
You should get the bulk of your planning out of the way before your business launches so that these matters don’t trip you up during your day-to-day duties. Don’t shoulder the burden all by yourself. If you have colleagues or employees, why not discuss the company budget with them? After all, it’s easier to spot holes in a plan if you have multiple pairs of eyes. Don’t just divide your financial plan into individual financial years or quarters - think about seasons too. Depending on the nature of your business, you may find that your products or services are more in demand during particular months of the year. Do your research and come up with financial projections based on facts. Plan for potential low-turnover periods and think about possible seasonal costs. Draw up a clear, accessible copy of your budget and revisit it at least annually, adjusting it based on your most recent experiences.
Add a Contingency to Everything
There are many potential causes of overspending. These issues may be as simple as failing to check which of your suppliers include tax in their price breakdowns and which don’t. Undertaking in-depth research and going through all upcoming transactions with a fine-tooth comb is one way to avoid problems, but you can’t plan for absolutely every eventuality, plus, time is money. One of the best ways to prevent overspending is to add a contingency to every element of your budget. This way, you’re protected if supplies or services end up costing more than you anticipated, or if you come up against unexpected maintenance issues. If you’re lucky, you’ll end up with a little something in the kitty that can be carried over into the next financial year. Looking for a Job? Check on Jooble.