How to Budget for Your Small Business

Starting a small business can be an exciting, yet stressful endeavor. The reason for the stress is that most small businesses fail within the first three years of opening. One way to make sure your small business is successful is to create a budget and stick to it. If your budget is less than your income, you'll be generating profit, but if it's the other way around, your budget needs to be revised and your spending decreased or you won't be in business for long. Here are some simple steps to create and stick to a budget so your small business can be a success:

1. Track your expenses. The first thing is to figure out how much you are actually spending. If you have been in business for a year or more, gather your bills and receipts to track your expenses. If you haven't been in business long or you are just starting, you may have to project what your expenses will be, and be generous with them. It's better to spend less than you planned for than to not have enough. You will have three different types of expenses: static, variable, and one time. Static expenses are those that are the same every month like rent for you office space, internet access, payments on a business loan, etc. These expenses don't change so they are easily tracked. Variable expenses are those expenses that you have every month, but that the totals change. These are expenses such as utilities, office supplies, marketing, and employee paychecks. One time expenses are those such as buying a computer, attending a conference, or making other one time purchases. Total each of these types of expenses. Static and variable expenses can be totaled for a month to month expenditure though your variable expenses should be averaged over twelve months. One time expenses should be totaled for the year then averaged out over twelve months so you can create your monthly budget. Once you've totaled all of your expenses and added them together, you are looking at your monthly budget.
2. Determine budget vs. income.
   Once you've totaled your budget, it's time to see if your budget is less or more than your business's income. If your budget is more than your income, it's time to evaluate where you can cut back on your spending. Every business should be able to evaluate where spending is frivolous and cut back so they can generate more profits. If it takes moving to a lower rent facility to stay within a reasonable budget, then it's time to start packing.
3. Set financial goals.
   Your next step in sticking to a budget is to determine your financial goals. Where to do you want your small business to be in six months, a year, ten years, when you retire from it? Don't worry about how you are going to get there when setting your goals. If you set big goals, it gives you more motivation to stay within your budget and think innovatively about the future.
4. Stick to your budget.
   Next is to stick to your budget. It doesn't really help you or your business to make a budget then over spend every month. That's just flushing profits down the drain. Sticking to your budget can be a great measuring stick for your success. The better you stick to it, the more profits your business is likely to make.
5. Stay organized
   Expenses will come up that you didn't think of, so periodically sit down and re-evaluate your budget for the leaks. Track your expenses with a computer program so you don't have to hunt for bills or receipts when it's time for a re-evaluation. Staying organized also helps you to see where your business is lacking and can inspire you to do more when you become successful.