Patrick Maddren how to run a business is a lesson that small business owners learn in their own ways. Many have it in them that receives the stamp of formal learning for those who pursue some course in business management. Regardless of what they teach in business schools, it is common knowledge that every business must have a budget or at least some fair idea about the finance needed to run the show. Budgeting is a crucial exercise because it is the starting point of any business that sets the revenue target to achieve for maintaining a healthy bottom line.
The exercise consists of matching expenses with revenue (earned or expected) so that Patrick Maddren business owners can understand if they have enough money to run the operations, generate profit, and plan for expansion or growth. Nor having a budget can render the business rudderless that ends in spending more than earning or spending less than what is necessary to facilitate growth.
Here are the steps to follow for
creating a business budget that works.
Follow the industry standards
Despite many differences between
businesses, there are some similarities too. Know about the ways that have
become a standard that the industry follows for creating a business budget. The
internet is an excellent source for information, and you can talk to some local
business owners, check the IRS website or the local library to gather an idea
about what percentage of revenue to keep aside for allocation to cost
groupings. Instead of looking for specific figures, follow the industry average
that can take care of an unexpected downturn that small businesses often experience.
Use a spreadsheet
Use a spreadsheet to tabulate the figures related to allocating costs by estimating the total money available and its percentage allocated towards various cost heads like raw materials and other costs. Repeat the same exercise for the overhead costs like rents, insurance taxes, etc. Knowledge of different types of budgets for small businesses and the way to create and implement it should be of good help.
Have some margins
The budget is all about what you foresee and subject to change. The kind of revenue you expect to generate or the expectation of certain expenses remaining fixed or that can be controlled might all change with time. To accommodate the changes to some extent, you must work out the figures by adding some margins to it so that you have enough financial reserves or would likely generate from the inflow of revenue before you allocate for business expansion or increasing the workforce.
Focus on cost-saving
Cost-saving is an essential aspect of
budgeting because it helps to increase revenue during tough times. It generates
an added stream of revenue that can come in handy to meet the immediate
expenses of paying bills or for capitalizing on business opportunities that
suddenly crop up. Look for big-ticket items that have greater potential in
saving cost. Making purchases at the beginning of the billing cycle allows
taking advantage of the payment terms offered by creditors and suppliers.
Interim review of the budget helps to
fine-tune it by making changes based on more realistic assumptions.