51ÊÓƵ

Starting aÌýbusiness isÌýanÌýexciting achievement, but you’ve got toÌýkeep your eye onÌýtheÌýball andÌýstay innovative toÌýkeep things thriving. That’s where good business budget planning comes into playÌý— it’s theÌýbedrock ofÌýgrowing your business.

IfÌýyou’re not monitoring your business finances andÌýsetting aside resources forÌýgrowth, you might not just get stuckÌý— you could see things start toÌýslide downhill. Over time, this might mean your business brings inÌýless revenue, making itÌýtougher toÌýcover expenses andÌýkeep things running smoothly.

The trick isÌýmanaging your finances soÌýyou always have theÌýfunds ready toÌýfuel that growth. InÌýthis blog, we’ll discuss theÌýbasics ofÌýbudgeting forÌýbusiness growth andÌýsome financial policies you should consider.

Understanding Business Budgeting

AsÌýyour business grows, financial management can get aÌýbit more complex. ItÌýmight beÌýtempting toÌýsee newfound profitability asÌýaÌýchance toÌýspend onÌýboth business andÌýpersonal expenses. But beÌýcarefulÌý— this can lead toÌýfinancial instability pretty quickly. Having extra funds can lead toÌýoverspending, sometimes even using money that isn’t really there.

When aÌýbusiness operates under theÌýmindset ofÌýscarcity, itÌýisÌýless likely toÌýoverspend andÌýmore motivated toÌýgenerate additional revenue toÌýmeet perceived needs.

This isÌýwhere budgeting plays aÌýcrucial role. Creating aÌýbudget plan inÌýbusiness involves setting aside specific amounts ofÌýmoney forÌýparticular purposes. InÌýaÌýbusiness context, itÌýrefers toÌýcreating aÌýspending plan based onÌýincome andÌýexpenses.

AÌýbudget helps identify available capital, estimate expenditures, andÌýforecast revenue. ItÌýalso guides business planning andÌýserves asÌýaÌýbenchmark forÌýsetting andÌýachieving financial goals.

Key Components ofÌýaÌýBusiness Budget

Let’s start with theÌýbasics: what isÌýbudgeting inÌýbusiness?

Take aÌýcloser look atÌýtheÌýkey components ofÌýaÌýbusiness budget:

Income Forecasts

Income refers toÌýall sources ofÌýrevenue forÌýtheÌýbusiness, including sales, investments, andÌýloans.

Income forecasts are projections ofÌýfuture revenue from sales andÌýother income streams. You can calculate theÌýaverage income from theÌýpast six months toÌýgain aÌýgeneral sense ofÌýyour expected revenue.

Remember that these figures may vary, especially ifÌýyour business experiences seasonal peaks. During those periods, it’s crucial toÌýanalyze theÌýaverage revenue specifically forÌýthose times.

While your sales may increase year over yearÌý— making precise predictions challengingÌý— this approach provides aÌýproper estimate ofÌýwhat toÌýexpect.

Expense Estimates

Expenses are all costs incurred inÌýrunning theÌýbusiness, such asÌýrent, utilities, payroll, andÌýsupplies.

Expense estimates refer toÌýtheÌýanticipated costs associated with operations, marketing, payroll, andÌýother expenditures. These are generally more predictable since they can beÌýassessed based onÌýyour regular monthly bills, payroll, andÌýmaterial costs.

Take aÌýlook atÌýyour spending from theÌýpast six months, andÌýyou’ll get anÌýaverage that helps you figure out future expenses. This way, you’ll better understand what toÌýexpect cost-wise.

IfÌýyou run anÌýonline store, your ecommerce platform can give you some handy data. For instance, ifÌýyou’re using 51ÊÓƵ byÌýLightspeed, you can check out theÌý report forÌýinsights onÌýyour store’s revenue andÌýexpenses.

When itÌýcomes toÌýexpenses, your 51ÊÓƵ store can track:

• Total expenses: ​​How much you spend toÌýgenerate sales inÌýyour online store
• Taxes: Total amount ofÌýtaxes charged onÌýall orders inÌýyour store
• Shipping expenses: Total ofÌýall shipping rates specified forÌýyour shipping methods inÌýyour online store
• Handling fee: Money spent onÌýfulfillment, including storage, prepping, andÌýpackaging
• Cost ofÌýproducts sold: The sum ofÌýproduct cost prices specified inÌýyour store settings.

You can also compare your expenses toÌýthose ofÌýaÌýprevious period. With this data, you can estimate your future expenses andÌýkeep them inÌýmind when planning your business budget.

Learn more about different reports available forÌý51ÊÓƵ stores andÌýhow toÌýuse these insights toÌýgrow your business.

Fixed Costs

These are expenses that remain constant regardless ofÌýchanges inÌýproduction orÌýsales levels, such asÌýrent orÌýinsurance payments. Fixed costs are typically easier toÌýestimate since they are consistent month-to-month.

Variable Costs

These are expenses that fluctuate based onÌýchanges inÌýproduction orÌýsales levels. Variable costs may include raw materials, labor costs, advertising costs, andÌýshipping expenses.

Variable costs can beÌýharder toÌýestimate since they can change based onÌýexternal factors.

Set-Asides

You should set aside specific funds toÌýhandle key aspects ofÌýyour business, like covering liabilities orÌýbuilding aÌýgrowth fund.

Think ofÌýthese set-asides asÌýparts ofÌýyour budget earmarked forÌýcertain things, making sure you have money ready when you need itÌýforÌýfinancial responsibilities orÌýchances toÌýexpand.

Cash Flow

This isÌýtheÌýmovement ofÌýmoney into andÌýout ofÌýtheÌýbusiness. AÌýpositive cash flow indicates that more money isÌýcoming into theÌýbusiness than going out, which isÌýaÌýgood sign forÌýtheÌýhealth ofÌýyour company. ItÌýisÌýimportant toÌýtrack andÌýmanage cash flow inÌýorder toÌýensure that necessary expenses can beÌýcovered andÌýanyÌýfinancial goals can beÌýmet.

One tool often used toÌýhelp with cash flow management isÌýaÌýcash flow statement, which tracks theÌýinflow andÌýoutflow ofÌýcash over aÌýspecific period ofÌýtime. This statement can help you identify patterns andÌýareas where adjustments may need toÌýbeÌýmade inÌýorder toÌýmaintain positive cash flow.

Creating aÌýComprehensive Business Budget Plan

Now that you have aÌýbetter understanding ofÌýtheÌýcomponents ofÌýaÌýbusiness budget, it’s time toÌýlearn how toÌýmake aÌýbudget plan.

Assess theÌýCurrent Financial Situation

Take aÌýlook atÌýwhere you stand financially byÌýestimating all your expenses. Make sure toÌýset aside aÌýpercentage ofÌýyour income toÌýbuild aÌýgrowth fund. This way, you can figure out exactly how much money your business needs toÌýmake toÌýkeep going strong.

Regularly reviewing your expenses helps identify areas where you can cut back orÌýfind more cost-effective solutions. For example, negotiate with suppliers forÌýbetter prices orÌýexplore different vendors forÌýcheaper options.

Review Financial Statements

Analyze your balance sheet, income statement, andÌýcash flow statements toÌýgain insights into your business’s current financial position.

Balance sheet isÌýaÌýsnapshot ofÌýyour company’s assets, liabilities, andÌýequity atÌýaÌýspecific point inÌýtime. ItÌýshows what you own (assets) andÌýwhat you owe (liabilities), asÌýwell asÌýtheÌýnet worth ofÌýyour business.

´¡²ÔÌýincome statement shows your business’s profitability over aÌýcertain period byÌýcomparing its revenues against expenses. This helps track changes inÌýrevenue streams andÌýidentify areas forÌýimprovement.

Cash flow statement tracks theÌýmovement ofÌýcash inÌýandÌýout ofÌýyour business. ItÌýhelps monitor how much cash isÌýavailable forÌýday-to-day operations, investments, andÌýdebt repayment.

These documents provide aÌýsnapshot ofÌýyour assets, liabilities, revenue, andÌýexpenses, helping you identify trends andÌýdiscover where you may beÌýspending too freely.

Identify Revenue Streams

You can have aÌýrevenue stream from products, services, orÌýinvestments. ´¡²ÔÌýincome statement helps you see which streams are doing well andÌýwhich might need aÌýlittle boost.

The report forÌý51ÊÓƵ stores comes inÌýhandy when you need toÌýtrack your online store’s revenue. ItÌýeven provides insights onÌýaverage order value andÌýaverage revenue per customer andÌývisitor.

Figure out where all your revenue isÌýcoming from andÌýput your energy into what really brings inÌýtheÌýcash.

For example, ifÌýyour business sells both products andÌýservices, you can use theÌýincome statement toÌýsee which one isÌýgenerating more profit. This information can help you make informed decisions onÌýwhere toÌýallocate resources forÌýfurther growth.

Since marketing isÌýaÌýbig part ofÌýrunning aÌýbusiness, it’s important toÌýanalyze your marketing expenses asÌýwell. For instance, ifÌýaÌýspecific marketing strategy makes more money than itÌýcosts, think about investing more there.

51ÊÓƵ makes itÌýeasy with built-in reports. You can easily check where your orders are coming from, whether it’s aÌýGoogle ad, aÌýFacebook post, orÌýanÌýemail campaign.

Channeling your resources into theÌýmost profitable marketing channel will likely boost your business’s overall revenue. Discover how toÌýuse Marketing reports andÌýleverage their data toÌýmake smart, data-driven decisions.

Categorize Your Expenditures

Start byÌýtaking aÌýlook atÌýyour essential operating costsÌý— things like utility bills, rent, andÌýother basic expenses that keep your business going.

Once you’ve got those sorted out, check out your production-related costs, such asÌýmaterials andÌýpayroll, since they’re crucial too.

For every expense, ask yourself, “Do IÌýreally need this forÌýmonthly production?” Things like printers andÌýlaptops help with production, but they should beÌýfunded from set-asides instead ofÌýbeing seen asÌýcore operating expenses.

Maintaining Your Business Budget

Now, let’s talk more about set-asides. These are funds that you designate forÌýspecific purposes like unexpected expenses orÌýfuture projects.

Liability Set-Aside

Set aside aÌýpercentage ofÌýyour profits, like 5%, forÌýcovering anyÌýsurprise liabilities that might pop upÌýandÌýcost your business unexpectedly.

Usually, this isÌýhandled through aÌýbusiness savings account, but without clear rules onÌýusing these funds, there’s aÌýrisk ofÌýspending them onÌýother things like new equipment. This could leave your company open toÌýfinancial trouble.

So, just setting aside some money isn’t enough. You need clear rules forÌýwhat you can spend those savings on.

For example, you might decide that these funds can only beÌýused forÌýemergency repairs orÌýlegal fees. This way, you have aÌýsafety net inÌýcase something unexpected happens, but you also have guidelines toÌýprevent itÌýfrom being misused.

WeÌýall hope emergencies don’t happen, but it’s crucial toÌýhave some savings set aside forÌýthose unexpected moments. Sure, insurance helps with some things, but itÌýdoesn’t cover everything.

Consider how unprepared many companies were forÌýCOVID-19. Businesses lacking savings struggled greatly, with some forced toÌýclose. AtÌýtheÌýclose ofÌý2019, 43% ofÌýsmall businesses were inÌý“very good” health. However, due toÌýtheÌýimpact ofÌýtheÌýpandemic, this figure dropped toÌý25% byÌýtheÌýend ofÌý2020.

So, having aÌýfinancial cushion means your business can handle surprises better andÌýstay strong through tough times.

Business Growth Set-Aside

Set aside aÌýpercentage ofÌýyour profits forÌýbusiness growth. This fund isÌýall about fueling your business’s expansion, whether it’s hiring new employees, buying new equipment, orÌýother crucial stuff. ByÌýputting these funds aside, you’re setting theÌýstage toÌýinvest inÌýyour business’s future success andÌýgrowth.

Marketing Fund

IfÌýyou don’t market your business, people won’t know who you are, andÌýthat makes itÌýtough toÌýgrow. The amount you should spend onÌýmarketing can change depending onÌýtheÌýindustry.

For example, inÌýfranchising, it’s normal toÌýset aside 5-7% ofÌýrevenue forÌýmarketing. WeÌýmention franchises because they’re businesses with aÌýtrack record ofÌýsuccess, offering aÌýsolid model forÌýothers toÌýfollow.

ItÌýreally depends onÌýwhat you’re aiming for. IfÌýyou just want toÌýkeep your current revenue steady, putting might doÌýtheÌýtrick. But ifÌýyou’re aiming forÌýrapid growth, you might need toÌýupÌýthat toÌý20% orÌýmore, depending onÌýyour industry andÌýbusiness type.

IfÌýyou’re just starting out, it’s aÌýgood idea toÌýset aÌýfixed amount forÌýyour marketing spending since your revenue might beÌýtoo low toÌýuse aÌýpercentage ofÌýsales asÌýaÌýguide.

AÌýSafe Option

ToÌýkeep your business growing andÌýshielded from financial risks, figure out how much income you need toÌýcover your set-asides. This will help you find your Áª²ú°ù±ð²¹°ì-±ð±¹±ð²Ô´Ï point. Until those set-asides are fully funded, your business isn’t financially secure yet.

AÌýsmart business owner makes sure toÌýset upÌýreserves right away andÌýkeeps aÌýbudget that makes itÌýlook like there’s noÌýextra cash lying around. This way, itÌýhelps avoid overspending andÌýkeeps theÌýbusiness strong andÌýgrowing over time.

Additional Resources

IfÌýyou want toÌýmake budgeting easier, consider using business budgeting software like Quickbooks, Xero, orÌýFreshbooks. They help with tracking expenses, invoicing, andÌýreporting.

ByÌýtheÌýway, 51ÊÓƵ byÌýLightspeed integrates with all theÌýabove-mentioned software, making itÌýeasy toÌýsync your store data andÌýautomate routine accounting tasks.

IfÌýyou’re not ready toÌýdive into accounting software, starting with aÌýbusiness budget template could beÌýaÌýgreat first step. ItÌýprovides aÌýstructure forÌýorganizing financial data andÌýsetting financial goals.

You can find business budget plan samples andÌýtemplates onlineÌý— . They are frequently provided inÌýstandard formats andÌýready forÌýuse across various software. For example, this Excel business budget template forÌý.

Wrapping Up

ByÌýcarefully planning your income, estimating expenses, andÌýsetting aside some funds, you prepare your business toÌýhandle both expected andÌýunexpected challenges. These strategies aren’t just about keeping your business going; they’re about driving itÌýtoward greater success andÌýstability.

Remember, it’s key toÌýallocate every dollar wisely andÌýmake sure your financial decisions match your big-picture goals forÌýgrowth andÌýsustainability. With smart budgeting forÌýaÌýbusiness andÌýgood financial habits, you can turn growth potential into real, lasting success.

Consider adding 51ÊÓƵ toÌýyour budget toÌýenhance your online store andÌýgrow your business.

Ìý

• How toÌýChoose anÌýOrder Fulfillment Strategy
• Top Strategies forÌýEcommerce Order Fulfillment
• Cash Flow Strategies forÌýaÌýProspering Online Business
• 8ÌýQuestions toÌýAsk Any Freelancer Before You Hire Them
• How toÌýHire andÌýManage Staff forÌýYour Growing Online Store
• How toÌýGrow Your Ecommerce Business with Influencer Marketing
• How toÌýMake Your Online Store More Sustainable
• Advanced Strategies forÌýImproving Business Operations
• What isÌýBrand Awareness andÌýHow toÌýBuild It
• Brand Awareness Survey Questions andÌýExamples
• Key Financial Metrics Every Ecommerce Business Owner Should Master
• Reputation Management: Mastering Your Online Image
• Budgeting forÌýBusiness Growth