Episode 17 – BUDGET 101. Knowing how to create a budget for your business is essential. Ashley wants to get more structured and create a budget for her business.
I started running Facebook ads for small businesses in my area as a way to supplement my income. My first client was a friend, and that client turned into another, then another, and soon I was out-earning what I made as a marketing coordinator, so I decided to transform my side hustle into a full-time business. I can make around $1,000-$1,500 per month/per client with just a few work hours each week. I have enough clients now to transition my side hustle to a small business. I feel I should get more structured and create a budget for my business. But I don’t know where to start! Can you help me?
Here is what you can do to create your first budget.
First, let’s start with your revenue. If you have ten clients generating at least $ 1,000 each, you have monthly sales of $10,000. Be more specific.
If you have many packages, I suggest you list them separately.
Number of clients x Price of package one = REVENUES from package 1
and so on; you do the same for each package. Now you need to be realistic about your estimated sales; make sure your goals are attainable.
Remember, if you want to increase your sales, you will probably need to increase your resources.
Now, let’s talk about expenses. Fixed costs and recurring business expenses keep you operating and remain the same regardless of production output.
You must pay these expenses whether you sell one or 100 packages.
We are discussing rent, insurance, taxes, telecommunications, software subscription, etc. The goal is to keep your fixed expenses as low as possible when you start your online business.
Other tips: Set aside money for unexpected costs. In case something happens, you may want 3 to 6 months of revenues in from of you. Also, revisit your budget often.
Remember, keeping track of financial ratios is essential. Often, I see entrepreneurs managing their businesses without looking at their company’s ratio. You should also track your numbers to manage your business better.
Tracking your ratio will help you examine your company’s financial health.
Ratios reveal essential information about your business, such as whether you have accumulated too much debt, have too much inventory or are not collecting receivables quickly enough.
Remember, budgeting is the first step toward financial freedom.