Sound Business Advice: Make A Budget Plan
Most cases of failed startup businesses are caused by one simple yet crucial mistake: their owners started out without a plan. By "plan, " we mean not just a timeline of the next steps after launching the business, but a detailed schedule that plots out the financial conditions of the business before it starts and during its operations, including prospects and projections.
An important part of every business plan is the budget plan. And a good budget plan is one that gives you a clear idea of where your finances will be in the next quarter, half, or the end of the year. There are a lot of sample business budget plans available online. If you look through them, you will find out that budget plans can be an informative tool that can help you make informed business decisions as you go along.
A sample business budget illustrates a company's projected profits from scheduled sales and operations. The most important thing that should be seen in your business budget is a 12- or 24-month forecast of your business operations. Old-school entrepreneurs are more comfortable with a hard-copy business budget that they can fill in with updates while the more modern and tech-savvy ones would want to make their plans on a spreadsheet program that automatically calculate numbers based on formulas that you input. Either way, there are sample business budget plans that you can print out or download onto your computer and edit. The important thing is for you to update and revise your business budget regularly so that it is always 12 or 24 months ahead.
Let's get down to the components of a business budget. Every sound business budget should have four columns: first, the sales and revenue projection; second, the cost of goods or services sold; third, the profit or loss; and, fourth, the profits and losses over time.
Your sales projection should not be just an arbitrary vision of what you want to earn. On the contrary, it should be based on trends, scheduled sales activities and whatever marketing campaigns that you have in the pipeline. It is also advisable that you plot your sales targets in three points-the low, medium and high.
The cost of goods or services sold, on the other hand, is a list of all the expenses that you incur to produce and deliver your products and services to your end-customers. These expenses typically include cost of purchase or production of the goods or service that you sell, any expenses for marketing and sales promotions, costs of administration and business operations, and other relevant costs representing the out-of-pocket expenses.
The third column is calculated based on the two previous figures. If your actual sales exceed your cost of goods column for the present month, this means your third column is a positive number, representing profit. If it's the reverse, then it's a loss for the month. Startup businesses usually go through a series of loss months. However, it is important to see if the margins between the sales and costs are decreasing. If it is, then it's a healthy sign that the business is growing and you can expect to see profits in the coming months.
Finally, your budget plan should also show the profits or losses that you accumulate over time. You can do this by summing up the third column say, for the last quarter or half-year, to get the total. If the number you get is a negative, use this with the sales trend numbers to evaluate how much capital you need to infuse to break even or achieve your profit.
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