Business Budget Planning

I. Business Plan Directives

All businesses start out with three main elements prominently featured in the general makeup of the endeavour. These would be listed as revenue to be earned, expenses to be incurred along the way and the projected profits. These three categories are usually studied before the actual business entity is launched and through this process there is always the need to have an effective budgeting platform in place.

1. Business Budgeting Basics

Business Budgeting is a process that is crucial to the success of any company.

Entrepreneurs and business owners need to plan and allocate funds for all the different aspects of their operations such as expenses, profits etc.

The expenses which usually fall into three separate categories such as the semi-variables , the fixed costs and the variables costs.

All these calculations are based on the monthly ratios indicated during the business. This is the most detailed section of the business engine and usually requires the most attention when it comes to managing the cost items.

The profits to be achieved is usually the reason for starting a business, so the basic profit determined is also part of the budget.

Successful companies calculate their monthly budget and make the necessary adjustments accordingly to ensure optimal profit probabilities. Calculations for budgeting purposes can also be performed daily, weekly, or monthly depending on your individual business needs and style.

2. Steps to Better Business Budgeting

The following are some tips to help you ensure that your business is budgeting well and effectively.

It is necessary to check industry standards and sentiments on a regular basis as the percentage of revenue is mostly affected by the market behaviours

The smaller the business entity, the more likely it is to be affected by the volatility of the market, and this is especially so when there is a downturn in the economy.

A clear estimate of the expected return on amounts expected against the percentages allocated toward tools and materials relevant to the business will give you clear picture of the expected future costs.

Ideally this also leads to better cost savings that can positively contribute to the overall success of the company.

3. Impacts of Debts on Business Budgets

There are many different types of debts that a company may incur, here we have identified two main different types of debt: operating debt and long-term debt.

Operating debt is the type of debt that you incur when you borrow money to buy inventory or supplies, or when you borrow money for short-term expenses like taxes or payroll.

Long-term debts are those that require repayment over a longer period, such as mortgages or car loans.

It may be rather surprising to note that there are some debts that are considered “healthy” debts within the frame of a business budget.

These may include debts incurred during setting up the business which are normally looked upon as investments but are nonetheless debt incurring costs.

When starting a business, the individual should consider all the different aspects that the business would have to focus on, and all the relevant tools it would need to do so effectively and efficiently.

Ideally this also leads to better cost savings that can positively contribute to the overall success of the company

Once such needs are clear, it’s a good idea to start looking at the financing options without significantly impacting the actual budget available to your business.

Another good practice is also looking at used supporting materials and tools, cheap and effective advertising opportunities, working in a smaller and less flashy environment, minimising overheads, looking into tax reliefs and rebates are just some of the actions that can be taken

    4. Managing Business Budgets and Finances Together.

    Business budgets are not just something that companies use when they are in financial trouble.

    In fact, the best time to create a budget is when things are going well for the company so that they can prepare for future growth or downturns in business.

    For the enthusiastic business owner, the initial action of providing credit to customers may end up being a very poor business decision that will cost the business entity its future.

    By this action the intention is to entice the customer to make a commitment with the promise of eventual payment forthcoming.

    However, this style does not really help the business entity.

    To start up the business, there may have been debts incurred which require the servicing of interest.

    Therefore, without some incoming revenue immediately enjoyed, such debts will not be adequately serviced.

    this might generate further debts and will eventually be the factor that falters the positive business growth.

    To minimize this possibility, The first step is to create a list of all possible expenses, no matter how small or large they may be.

    This will help them see where they can trim some fat without sacrificing any major aspects of their business.

    The second step is to go through each expense and determine if it’s necessary or not, and whether it’s worth the cost associated with it.

     II. Business Analysis

    This part of the business Plan will help determine your targets (Customers), your competitors and finally built your SWOT Analysis.

     Strength

    Weakness

    Opportunities

     Threats

    You should consider answering to the questions in the sections below to complete this part of the exercise.

    1.  Your Business
    

      

    • Describe your product or Service
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    • What problem does your business solve?
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    • How is your business structured? Sole trader or structured organisation, describe
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    • What is your history and experience?
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    2. Your customers
    
			
    
				
				
				
				
				
    

      

    • How do your customers decide where to shop?
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    • How will you target your customers?
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    • Do you have any customers already?
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    3. The Market
    
			
    
				
				
				
				
				
    

      

    • What Market Trends have you noticed
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    • What businesses are you competing against?
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    • What do people think about your competitors?
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    • What have people told you about your product or services (Like and dislike)
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    4. Marketing Strategy
    
			
    
				
				
				
				
				
    

      

    • How does your product or service benefit your customer?
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    • How will you promote your product and services? Marketing Channels
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    • Why have you chosen these channels?
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    • How much will your marketing Cost?
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    5. Operations
    
			
    
				
				
				
				
				
    

      

    • How will you create your product or Service?
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    • How will you deliver your product or service to your customer?
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    • Who are your suppliers? List them
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    • What equipment do you need and how much does it cost?
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    • Describe your business premises, does it support any growth ambitions?
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    • Describe transport and logistics
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    • Legal requirements
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    • Insurance (Public liability insurance, employer’s liability insurance, product liability insurance, professional indemnity insurance…)
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    Please Head to the DIY BUSINESS SOLUTIONS tab for the Ready to use Excel file Business Plan