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Show Me the Money!
How Much Do You Need?
There's only one thing that stands between you and your cherished dream of being your own boss: money, you think. Of course, the amount of money needed varies tremendously depending on the type of business you are starting, its size, whether it is local or national in scope, whether it is home-based, and other factors. Many surprises will be found along the way -- some things cost a lot more than you think, others a lot less.
The good news is that many small businesses have been started with $5,000 or less. This is possible if it's a small service business, requiring little equipment, sparse marketing tools, and minimal inventory or materials. If your business requires specialized equipment, employees, a leased space, etc., your startup costs will be much higher. This does not include your own daily living expenses, by the way.
Here we give you Idea Cafe's Instant All-in-One First Year Budget Worksheet to figure your expenses and see how much financing you'll really need. Since calculating isn't one of our favorite activities -- whether by hand, calculator, or even computer spreadsheet -- we've devised this instant way to get the job done without its usual dog-biscuit taste.
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Don't Be Intimidated! Sure, MBAs have lots of sophisticated ways to deal with budgets, but -- unless your business needs to get really big really fast -- you don't have to fear what you don't know. The important thing is to just be willing to honestly look at the financial future you are creating, then as time goes on, check your estimates against reality, and fine-tune your budgets accordingly.
Ask for help. You can't know everything, especially when it comes to how taxes affect your business, so get a CPA you trust to review your budgets now, and to stay involved. Don't just wait til April to ask what you can do to increase income or reduce taxes -- then it'll be too late. Check the resources listed later in this article to get industry averages and other info that will help you.
Be realistic. The closer your assumptions are to reality, the fewer lumps you'll have to swallow.
Use our Instant All-in-One First Year Budget Worksheet to type in all the kinds of expenses and income you can cook up.
You'll be putting these in three pots:
Don't you love it when something you dread gets really easy and fast? Well, you're in for a treat. Idea Cafe's Instant All-in-One First Year Budget Worksheet automatically calculates your expenses and amount of financing you'll need.
"Pad" expense estimates liberally. You'll be tempted to think low-cal here, planning to be scrape by with bare-bones outgo, but there WILL be unanticipated costs like repairs for equipment breakdowns, additional advertising because the initial campaign didn't "pull" as hoped, and larger-than-imagined phone bills. So, just fatten up expense numbers by 25 per cent or more in the budget worksheet. Better to plan for them now, than be forced to go on a starvation diet later.
Don't overestimate your revenue. You know your business is going to do great, but you don't know how long it will take before money comes in. So, face up now to possible worst-case scenarios, just in case.
Run several budget scenarios. With our budget worksheet, it's easy to change figures and print out a new budget. So have some fun and envision the future in different ways: what if you stick with your day job 6 months longer; what if El Nino keeps you from delivering on time; what if a big star wears your company's jewelry in People Magazine?
Get professional help. Go over your budgets with your CPA, or get help from your local SBDC Small Business Development Center. Experienced advisers will be able to spot things you're blind to (like tax implications, for example), and help you steer clear of financial crises.
Dun & Bradstreet
Small Business section
Small Business Resource Center
For sample financial statements:
For industry statistics and financial ratios:
For the Robert Morris Projection of Financial Statements form,
For books on budgeting:
For the SBA's take on a variety of small biz topics:
For free advice from retired business people:
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