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
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.
1. Budgeting Basics
2. Creating Budgets to Determine How
Much Financing You'll Need
3. Idea Cafe's Instant All-in-One
First Year Budget Worksheet
4. Idea Cafe Tips
5. Web Sites
1. Budgeting Basics
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
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.
Create Budgets to Determine How Much Financing
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:
- Your Personal Living Expenses (after all, you -- and
your family -- gotta live, job or no job, business or no business)
- Business Start-Up Costs (What you've got to cough up
before your new business can open up.)
- Business Ongoing Costs (Month-by-month estimate of how
fast you'll burn up money, sweetened by how much you can pull
in the first year)
3. Idea Cafe's
Instant All-in-One First Year Budget Worksheet
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.
4. Idea Cafe Tips
"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
5. Web Sites
Dun & Bradstreet
Information on D&B's products and services, along with some business
how-to's. Order business backgrounders on-line for $20.
World's biggest organization devoted to support of entrepreneurial
firms, whose members include business incubators and business assistance
Small Business section
for a directory of small business Web sites with links to tax, finance
and consultant sites.
Entrepreneurs' roundtable, matchmaking service between small businesses
who need money and money people, extensive resource list and expert
advice, sponsored by quarterly Entrepreneurial Edge magazine,
the official publication of the Edward Lowe Foundation.
Extensive lists of other sources, including books, magazines, and
the Small Business Administration, by author of the book Working
Resources and information for small businesses, from financing to
Small Business Resource Center
catalog of small business materials.
For sample financial statements:
Dun & Bradstreet Inc.
99 Church Street
New York, NY 10007
Industry Norms and Key Business Ratios, $450 for book or
CD-ROM for service or non-service industries; $135 for report or
diskette on a single industry.
Understanding Financial Statements, a free booklet, is also
available from Dun & Bradstreet; call 800-TRY-1DNB.
For industry statistics and financial ratios:
Robert Morris Associates
1650 Market Street, Suite 2300
Philadelphia, PA 19103
RMA Annual Statement Studies, $165 for diskette, $119 for
book on all industries.
For the Robert Morris Projection of Financial Statements form,
widely used in preparing financial statements for business plans:
Bankers Systems Inc.
P.O. Box 1457
St. Cloud, MN 56302
For books on budgeting:
Dickey, Terry. Budgeting For A Small Business (Crisp Publications,
Gill, James O. Financial Basics of Small Business Success
(Crisp Publications, $15.95)
For the SBA's take on a variety of small biz topics:
P.O. Box 372
Naperville, IL 60566
For free advice from retired business people:
Service Corps of Retired Executives (SCORE)
409 3rd Street SW
5th Floor, Suite 5900
Washington, D.C. 20023-3212