Looking to start your own business? Let’s begin with the most crucial financial element - budget! Here are 5 simple steps for you to create your small business budget plan.

1. Determine the revenue streams

The first thing you should know is how much your business is making and where they are from. Depending on the nature of your business, you may have one or multiple income sources. For example, if you run a restaurant, your food and beverage sales would be your source of income.

2. Identify Fixed Costs

Fixed costs are any constant expenses that you have to pay regularly. Rent, utilities and maintenance could be some of your business’s fixed costs. If you are starting a business and don’t have the financial data yet, you can make a projection of known fixed costs. For example, the monthly rent of your shop!

3. Identify Variable Costs

Unlike fixed costs, variable costs change based on your business activities and performance. Reviewing this expense at the end of each month allows you to see its pattern and make a more accurate budget and projection. For example, variable costs at a restaurant would include things like food cost, labor cost, delivery cost etc.

4. Check for one-time expenses

Besides fixed and variable costs, make sure you budget for any big one-off expenses. This will ensure that your business is free from unexpected financial burden or any sudden random cost. Examples of such spending at a restaurant could be new equipment purchases or unforeseeable accidents such as fire.

5. Putting them together

Once you have identified all your income sources and expenses, it’s time to put them together into a brief overview of your business finance. Using the restaurant example, here is what your restaurant budget might look like each month:

Sales

Expenses Variable Costs

Fixed Costs

One-time Expense

Total Expenses: $7,480

Net Income: $2,520

Now that you see where your restaurant stands financially, you can be financially prepared for your business. If your business is making a loss, you can decide to cut costs. If you earn more profit than you expected, you could consider reinvesting the money into the business to help it grow and expand further.

Congratulations, you’re one step closer to starting your own business!