Small Business Budget Tips

small business owners calculating operating expenses

Small Business Budget Tips

| 11.08.21
Susan G.

Profits, costs, estimates, cash flow… is your head spinning yet? Putting together a budget can seem like a daunting task but it doesn’t have to be complicated. In fact, it is crucial to make budgeting a routine part of managing your business—29% of small businesses fail because they run out of cash. Having a plan can help! We’ve got some simple tips on budgeting for your small business.

Small Business Budget Tips

Start with how much money your small business is making. When thinking about the money coming in, focus on revenue for this step instead of profits. Profits are what is left after expenses are deducted while revenue is the money coming in before expenses are subtracted. Consider these tips:

  • Research all of your past and present income sources by month 
  • Calculate the monthly revenue for the past 12 months (ideally) 
  • Look for seasonal patterns like a summer slump

Determine your fixed costs. A fixed cost is any charge amount that does not tend to change each time it is incurred—monthly, weekly, or yearly. Some examples to consider include a lease, small business insurance, taxes, predictable supply costs, and debt repayment. Add up your fixed costs for each month.

Consider your variable expenses. An expense that is variable changes in amount from month to month. While that makes variable expenses harder to predict, documenting them can reveal trends. Are the costs increasing? Is there a month where a variable cost tends to be higher? Some variable costs to consider are marketing costs like ad spends, some utilities, and fixing any equipment that might break in the course of your business operations. Add up your variable costs for each month.

Construct a profit and loss statement (P&L). You’ve got your revenue, your fixed costs, and your variable costs for (ideally) the past 12 months. It’s time to bring those together in a P&L. Don’t sweat it! For each month, add up the revenue and subtract that month’s fixed and variable costs. That’s it! You now have a useful historical look at your business’s financials. 

Plan for the future. A historical look at your small business budget is valuable but a future plan is probably what you’re after to help your business succeed. Here are some tips on future budget planning.

  • Include a contingency fund to contribute to each month
  • Look for trends revealed on your P&L like seasonal trends or how often equipment needs service 
  • Consider using software like Quickbooks to help you budget
  • Have a system or procedure for where you can find your relevant figures and when you will use them
  • Tackle budget work routinely and more often to help reduce budgeting stress
  • Consider hiring an accountant

We know that budgeting is not everyone’s favorite topic. It elicits groans and moans. We know you’d rather work on your core business. Putting a business plan budget in place will help your core business succeed and make your life as a small business owner a little easier. 

Small business insurance from B2Z is also here to make your life as a small business owner easier. We offer the insurance coverages you need, customized for your unique business. We’d love to help insure your business!

About the Author

B2Z Insurance is a small business insurance company that provides coverage for on-the-go business owners: simple explanations, easy application, digital quotes, and mobile claims. A product that is easy-to-use and helps you assess the unique coverage needs of your business with confidence—freeing you up to grow your business.