Copyright © Karen Morel
http://www.ExploringMarketingSuccess.comOne of the most difficult things to do when you start a new business
is putting together a budget. Without any financial history on which
to base income and expenses, it may seem like guesswork, but
as part of any business plan a tentative budget can be established
with some thought and anticipation for the future.
In most businesses there are two main categories, income and expense.
Under your expense category there can be several sub-categories often
falling into two main areas of controllable expenses and uncontrollable
expenses.
While many business owners claim they can control every expense involved
in their business, they are simply kidding themselves as some things,
such as utility costs, the amount of rent and other so-called fixed
costs can, and do change, with the owner having no control.
Other expenses such as payroll, insurance and advertising can be subject
to a budget, and they are considered controllable expenses. If the business
begins to fall off, you can control some of these expenses by laying off
employees and cutting back on advertising. However, living by a budget
will help maintain profitability in many respects but can also turn against
you in the long run.
Depending on the viability of your business, it is often a better investment
to bite the financial bullet on employee wages and still provide good customer service to your customers until business picks up. By trying to do everything yourself not only will you burn out quickly, but if no one is taking care
of the customers, it will not take long until there are no more customers
to care for.
There are two ways to budget your business money and these are through set
dollar amounts and percentage of income. Many businesses will budget their controllable expenses by the dollar and non-controllable by percentage of
income. Obviously a good part of the owner’s time is going to be spent on
bringing money into the business. How much they have to spend on controllable expenses will be in direct relation to income.
For example, a company earning $20,000 a month in income has budgeted six
percent for payroll, providing $1,200 for payroll. If the income level rises
to $50,000 the budgeted payroll percent does not change but the dollars
available for payroll climbs to $3,000. With an obvious increase in business
which has created the additional income, the owner will probably need
additional employees to take care of business. There are many other expenses
that fall into the payroll account such as worker’s compensation charges,
Social Security tax paid by the employer and paid vacation time or other
perks determined by the employer.
While a budget may be difficult to establish for a new business, it is a
necessary evil for all business owners.
About the Author:To find the best home based business ideas and
opportunities so you can work at home visit:
http://www.ExploringMarketingSuccess.com
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