If you run a small business, it’s likely that you’re operating on a relatively limited budget. Whether you bootstrapped your business or are trying to pay back loans you took out to cover your startup costs, it’s in your best interest to conserve money wherever you can.
If you want to keep your business operating in the black, you’ll need to account for both fixed and unplanned costs, and then create — and stick to — a solid budget. Experts offered their advice for small business owners looking to keep their finances in order. [4 Tips for Reducing Startup Costs]
1. Define and understand your risks
Every business venture has a certain degree of risk involved, and all of those risks have the potential for a financial impact on your company. Paul Cho, managing director of Headway Capital, said that small business owners need to consider their long- and short-term risks to accurately plan for their financial future.
Understanding the potential risks facing you on a short- and long-term basis is important for all small businesses. Once you’ve mapped out the threats to productivity, a clearer picture can be built around emergency planning, insurance needs, etc.”
2. Overestimate your expenses
If your business operates on a project-to-project basis, you know that every client is different and no two projects will turn out exactly the same. This means that often, you can’t predict when something is going to go over budget.
For this reason, Ontra advised budgeting slightly above your anticipated line-item costs, no matter what, so that if you do go over, you won’t be fully unprepared.
3.Pay attention to your sales cycle
Many businesses go through busy and slow periods over the course of the year. If your company has an “off-season,” you’ll need to account for your expenses during that time. Cho also suggested using your slower periods to think of ways to plan ahead for your next sales boom. –
4.Plan for large purchases carefully and early
Some large business expenses occur when you least expect them. However, planned expenses like store renovations or a new software system should be carefully timed and budgeted to avoid a huge financial burden on your business.”Substantial business changes need to be timed carefully, balancing the risk with the reward and done with a full understanding of the financial landscape you’re operating within,” Cho told Business News Daily.
5. Remember that time is money, too
One of the biggest mistakes small businesses make is forgetting to incorporate their time into a budget plan. Ontra reminded business owners that time is money, especially when working with people who are paid for their time. Ontra recommended treating your time like your money, and set external deadlines later than when you think the project will actually be done.
“If you believe the project will finish on Friday, promise delivery on Monday,” he said. “So, if you finish on Friday, deliver the work early and become a star. If for some reason time runs over, deliver on Monday and you are still a success.”
6. Constantly revisit your budget
Your budget will never be static or consistent — it will change and evolve along with your business, and you’ll need to keep adjusting it based on your growth and profit patterns. Cho suggested revising your monthly and annual budgets regularly to get a clearer, updated picture of your business finances.