Before You Begin: How to Create a Realistic Budget for Your Startup

realistic budget

One of the most important tasks for any prospective business owner is creating a realistic budget.

When you create a budget for your startup, you will identify anticipated income, expected expenses, and various cash needs. A realistic budget is a key component for any startup business plan. It’s essential that you have it in place before you begin any of your company’s other work.

Loans on the same day are available in a financial emergency for personal use. However, when you’re operating a business, you will need to find emergency funds elsewhere. Therefore, a realistic budget can help you to consider your initial business needs. This in turn will help to save you a significant amount of money and time. Let’s take a look at how you can do this.

 

RELATED ARTICLE: HOW TO START YOUR BUSINESS ON A SHOESTRING BUDGET

 

What Do You Need on Day One of Your Business?

The first step toward constructing a budget for your startup is to determine what you will need in order to open the doors on the first day. What will you need, therefore, on Day One of your business before you can begin serving your new customers?

To make things a little easier, break your budget down into the following four categories:

  • Facilities

This category includes signage, furniture and fixtures, as well as security deposits and any tenant improvements.

  • Equipment

To open your business, you will need office furniture and computers. You might also need shipping equipment as well, depending on the nature of your business.

  • Materials and Supplies

This section includes the materials and supplies you’ll need for your office and product areas. Additionally, it includes promotional and advertising materials.

  • Other Costs

Naturally, you will have additional costs that might be easy to overlook in your initial budget planning. These may include attorney fees, account setup fees, permits, and relevant licenses.

 

What Are Your Monthly Fixed and Variable Expenses?

In order to successfully budget for your startup, you’ll want to know as much as possible about your fixed expenses each month. The most common monthly fixed expenses include:

  • Rent
  • Office supplies
  • Equipment lease payments
  • Business phones
  • Advertising fees
  • Business insurance
  • Employee payroll
  • Professional fees
  • Business loan payments

 

Estimate Your Monthly Sales

Estimating monthly sales is one of the most difficult parts of any startup budget. That’s because, quite simply, you won’t know what sales you will make within the first months of your business.

Because of this uncertainty, many startup owners forecast a number of different sales projections. Such a strategy helps to ensure that they are covered even in the worst-case scenario.

 

Create a Cash Flow Statement

Identifying monthly fixed and variable expenses and estimating your monthly sales can help get you on track for budgeting for your startup. Planning a realistic budget before you begin will help you to have a clear picture of your costs and sales at the outset.

As your business develops, you will be able to improve the accuracy of your startup’s budget. In time, you will be able to create a truly realistic budget.


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