From Work to Home: Create a Business Budget
Every Saturday, we´ll be taking a look at a step towards building your own home business. I know there are a lot of moms out there who would like to be work at home moms, but just aren´t sure how to go about it, so this From Work to Home series is designed to take you from developing a business idea to leaving your outside job. This is Part Five of the From Work to Home series. To see all articles, click here.
Why Create a Business Budget
Creating a business budget allows you to plan ahead. You need to know how much money to save up or ask for as a loan and then you can estimate how long it will take to reach this point. It´s also important to figure out how much your business will cost you to run on a monthly basis and estimate your sales. The first few months you probably won´t break even, but having a business budget will help you price your products or services so that you can aim to pay back your loan and start earning a real profit.
Having a proper business budget will help you stay on track when all you really want to do is spend your newly earned money on brand new equipment. It will remind you where you are going and should serve as a checkpoint each month where you can see how close to your monthly and end goals you really are.
How to Create a Business Budget
To do up a proper budget, you will need to spend some time thinking about everything your business will have to do. How are you going to start selling? If you will be selling products through Etsy or taking a sample around to stores to find one that will place an order, you only need one or two of each product to start off with. However, if you plan to start up at a craft fair or with your own shop out of the garage, you´ll need far more stock right off the bat.
Start Up Costs
Is there any special equipment that you´ll need? How much will it cost you? To save some money, you can look on Ebay or at second hand shops to see if you can source equipment a little cheaper. Don´t rule out things like a desk or worktable and any smaller tools that you might need, such as screwdrivers or paintbrushes. You will also want to figure out exactly how much you´ll need to buy enough materials to get your business off the ground. This is all included in the start up cost part of the budget.
Another thing to consider when budgeting for start up costs is any training, certifications or inspections that you´ll need. Some businesses, particularly those dealing with food and children , will require you to have special training or a home inspection before you can actually start up. This can cost anywhere from $10 to hundreds of dollars, depending on what you need to do. Investigate all the regulations related to your chosen business idea, before you get started on the budget.
Product
Decide now what products you will be making to get started. Figure out exactly how much each one will cost you, in materials and time. Don´t forget to put a price on your time. This can start out fairly low to begin with, but you should definitely not eliminate it. For materials that can be used for several items, like a block of wax, figure out how much you can make and then divide the cost by this number. For example, if you can make ten candles out of $25 of wax, each one is costing you $2.50 in wax alone.
For the profit side of things, you´ll want to check out the competitors and their prices. Then work out how much of a profit margin you can add to your products while still staying competitive. This is a process that might make you reconsider some of your products!
Not everyone will have products, you might be starting up a service-based business. In that case, you will need to decide how much your time is worth and study how much the market can pay. Don´t forget to add in any other costs, such as new furniture or equipment necessary. For example, if you are going to start up a medical transcription business, you will need to invest in a headset and foot pedals.
Other work at home moms will be doing projects or jobs on a per-job pay rate. For this sort of thing, you have quite a few options. You can charge by the hour (don´t forget to incorporate non-billable hours into the price), the project or parts of the project, such as page or word. Again, take a good look at the competition to get a feel for how to price your services.
Promotion
No matter what your business, you will need to do some basic promotion. This doesn´t have to be expensive, in fact, you can do a lot for free, like placing a business listing in a business directory. However, it´s a good idea to have some professional looking business cards and you may want to have flyers printed up as well. Other promotional costs can include taking out ads in the local paper or paying someone to leave flyers on car windshields.
Taxes
Talking to an accountant is a good idea when you are planning your business budget. Find out what exactly you can deduct and what tax bracket you will be in. This varies from place to place, so you will need to talk to someone who knows the tax laws where you live.
Doing your budget up on a program like Excel or OpenOffice Calc will allow you to change the numbers as needed and to use formulas to make everything easier. Having a business budget is like having a road map . . . you know where you are and where you need to be and the budget will help you get there safely.
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Working to a budget is crucial, otherwise your costs can rocket and you won’t be aware necessarily.
The budget should run side by side with the cashflow so you don’t have the same problems that many businesses have had during this recession.
One good start up business when you have a small budget is gardening. Do not buy things if you can produce them yourselves, especially on food. Try to be self sufficient. For example, vegetables could be planted right in the backyard. It would cost you less to plant them in mass numbers. Plus, you can make profit if the your garden is well taken care of.
Here is a good link that will get you started on your tools for gardening; http://www.storageshedplanner.com
Hope this helps.
I have managed to earn a fairly steady income in the market – now that has stabilized somwewhat