Once you have the idea and the plan set up, the next thing that you have to do is plan a budget for your startup. Now for the budget, you need to plan the consistent requirement and growth as well are emergency savings at the time of crisis. The failure of the budget plan has led to the demise of many startups in the first year itself. So what should you be doing to have a stable budget for a successful company?
Planning for day one of your startup
Start with determining the budget for day one of your business, deciding on the things required to open up your sale. The day one budget can be broken down into fours categories.
The cost required to facilitate your office, warehouse, transport and your location.
The budget for furniture, equipment, and vehicles needed to set up your interior, which includes machines, electronics and appliances too.
Material and supplies
The paper for paperwork, promotion materials, inventory, etc. also needs a record.
The accounting system, local licenses and permits, insurance deposit and other fees to establish your business.
Estimating monthly Fixed and Variable Expenses
Fixed expenses are the costs that will be necessary to pay every month. It does not change and does not depend on your number of customers. Your common monthly expense will include the rent, utilities, phones, credit card processing, website service fees, equipment lease payments, office supplies, business insurance, dues and subscriptions to professional publication. Other costs may include raw materials, production costs, commission on sales, postage, mailing, packaging and shipping, commission on sales etc.
Estimate Monthly Sales
Estimating the monthly sales can be the most difficult task as you have no idea what the companies sales will be by the end of the month since you are just starting. You might require to make three different sales projections to be ready for every scenario.
Best case scenario, the worst-case scenario and the likely scenario. The be more realistic in your budgeting, you must assume that not all sales will be collected. You might have a greater or smaller collection percentage based on your type of business.
Creating a cash flow statement
Cash flow is the money which goes in and out of your company throughout the month, and you will need an accounts department and a system to make it function more efficiently. Managing your cash flow is the key to have a stable and growing business as it is more important than the profits you make.
You can begin your cash flow statement by combining total costs with a total collection of money throughout the month. Sales and collection might be different unless you have cash or credit business. Your cash flow statement should have the record of Monthly Sales, Collected money, Total Fixed Costs, Total Variable costs, and Total Cash Balance. Your total cash balance can give you the information about your cash needs and how much you will need to borrow for working capital.
Start up costs
The hardest task i faced when starting my business was getting the initial start up funds to be able to start trading. For example, I identified what i thought were the most important costs, by most important I mean money that i needed to spend on things that were essential for my business to start generating an income such as a website. I then prioritized the costs from most to least important. You will find that the most important costs will generally cost more than the least important costs, and rightly so. However with that, there also creates a problem on how to actually fund the important costs.
In this instance, I chose to apply for some additional finances and use the money to pay for those higher cost items. There are many different companies that can offer business funding solutions, however i chose to approach traditional consumer finance company Payday Pixie as the amount i needed was under their maximum threshold of £2,000. For anything larger i would likely have approached a peer to peer lending platform as you can get some very competitive rates on loans of a larger value.