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Budget Planning for Small Businesses

By Nicole Noel

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When you’re planning to start a small business, it may seem like getting the necessary funds is the hardest part. However, once you secure the funding, there is still a range of other problems that can happen.

Planning a budget is crucial for a small business since it will prevent you from making a mistake that could potentially cost you your business. It’s also what banks and other financial institutions use to determine your rates and fees.

In the end, a budget is a blueprint of your business and what it could and should be. Use it to make long-term plans and create an infrastructure that could help you make your business plans a reality.

A strategic plan

Every business, no matter how small, should have a strategic plan. This plan shouldn’t focus too much on every aspect of finances or marketing data; instead, it should outline a general idea of what your company stands for and where you see it within the industry and market.

The plan should be put in writing and added to your company’s documentation. It’s a public statement and everyone interested in your business and its future should have an idea of what your overarching mission in the business world is. Don’t worry about making it artistic, just try to focus on what makes the company unique and what made you start it in the first place.

Check your competitors

When you’re starting a small business, it may seem like you’re treading on new ground and starting something from scratch. However, this is very rarely true. You can do the research on your competitors and take advantage of their experience.

It may also be a good idea to talk to a tax expert that specializes in your industry to get an idea of how much businesses similar to yours get taxed and what’s the best way to save on your taxes. This doesn’t mean you should ask for someone’s private data – you won’t get them anyway – you should just try to estimate the risks so that you know what to expect.

budget businessOverestimate the expenses

Before you proceed to get a loan, you need to try to calculate monthly expenses, so you can ensure the necessary the cash flow for running your business. For covering these short-term expenses created by a delay or an unforeseen event, you can always rely on fast loans.

The important thing is to always overestimate the costs and borrow a bit more money than you actually need at a given moment. This is a much better option than needing to take another loan.

Target profit margin

Determining what exactly makes your business successful can be difficult, especially in the beginning when you’re mostly operating with borrowed money. Also, businesses are often doing pretty well at first, but after a few months, they are faced with stagnation. That’s why you need to decide on target profit margin. It is what makes the difference between your profits and expenses.

It’s a much better metric for measuring your success than the other alternatives because good sales alone aren’t enough to consider your business a success. Have in mind that you won’t always be able to meet the target – it’s just something to keep motivated to achieve your goals.

Sales cycle

Retail businesses often work in cycles. This means that you’re going to have good and bad months in terms of sale and the number of customers. Those are sometimes related to holiday seasons, but there are no rules – you’ll just have to adapt as they come along.

Your budgeting plans should reflect this fact and try to cover for the less successful months. You should also step up your marketing efforts in those months as well – offer more sales, provide coupons or just invest more in ads.


Budget reviews should be a pre-planned, obligatory part of your yearly schedule. How often you need to do them depends on the size and type of your business, but every six months seems like a reasonable choice. The review should cover your entire budget, expenses, revenue, and your projections. Sometimes you will need to make some adjustment to your initial plans. Don’t think about this as a failure, these things sometimes happen, and you can’t plan every aspect of your business.

Budget plans are extremely important. They help you keep track of your business, borrow money and plan for the future. Always try to go a bit below your budget and you’ll do fine.

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