Startup Budget Plans For Your Small Business

By Yhordan Serpentini | May 21, 2022

From our previous topic on financial plans, we already know the cruciality of having a budget for your business, but it’s also equally as important to know HOW to create this plan. Here is how you can create a startup budget plan for your small business.

Preparing Financially & Mentally

The first step is actually to prepare yourself financially and mentally for the upcoming trials. If you have previous experience with business finances or have been the owner of a business for some time, the process to create a budget plan will be pretty straight forward as long as you have some statistics and data to analyze; however, if you’re just starting, then creating a startup budget plan will be a little harder and overwhelming.

Due to the lack of data you have to work with upon starting a business, you will have to create this budget plan with a well calculated estimated guesses for your income and expenses, until you have your first monthly or quarterly Profit and Loss (P&L) Statement to begin analyzing data.

Pre Start-Up Expenses

The first few things you should be aware of are your pre start-up costs, which include any branding expenses for logos, banners, advertisements, etc., and any basic market research—either done by yourself or from a paid service. These fees may be minor and potentially even one-time payments depending on where you want your business route to go, however, you should still include them into your budget plan regardless.

Start-Up Expenses

The next step in your budget is to estimate your actual start-up costs, which include any legal formations, taxes, business licenses, any permits, state registration fees, and any fixed or variable expenses that you have, or will eventually need as your company grows.

Fixed and variable expenses lies more towards the operating costs for your business. In case you aren’t sure, fixed costs are expenses that require payments regardless of profit, such as: any rent fees for equipment, storages, warehouses, or contracting fees for freelancers, or employee expenses, or insurances. Variable expenses, on the other hand, varies in proportion to your company’s sales, as well as the output of production. This includes anything such as: demand in supplies, usage of utilities, any shipping expenses, etc.

As mentioned in the examples, some of the most common operating expenses include rent, leases, business insurances, payrolls, utilities, taxes, inventory and supply management, manufacturing fees, professional fees, marketing, advertisements, and/or software services and equipment fees. On top of these expenses, you also must take reserves into consideration incase unexpected expenses were to occur, in order to prevent your business from meeting an early financial crisis.

It is recommended for businesses to have a cash reserve of at least six months worth of their income. Unfortunately, this is a start-up budget where your P&L isn’t yet available, nor do you have any additional details or sufficient data and statistics to examine for reference, so an estimated guess is left on you to determine. Try to reserve a minimum of 15-20% of your budget for unexpected expenses until you have access to better data—you can always seek additional guidance if you aren’t too confident with your budget.

Credibility Expenses

On a final note, you may also want to look into any additional expenses you may have, or will have in the future, to boost your company’s credibility. Such expenses would include a website or a domain, a business email, a business address or Post Office (PO) box, registered trademarks, copyright, etc.

Once you’ve documented a decent estimation for each of your expenses, you will have a good start-up budget to work with. Note that you will eventually have to readjust this budget overtime, either monthly, quarterly, or annually, depending on your business’s income. You can access our Spending Plan page which will help you calculate a spending budget plan based on your estimated expenses.

Startup Budget Plans For Your Small Business