Creating a Startup Budget for Success

TABLE OF CONTENTS

    Creating a budget is among the most important tasks new business owners must tackle. A budget can help track your startup needs and expenses against expected income. As a new business owner, it can be overwhelming to plan together as you don’t have any previous information to base your figures on. Today, we will talk about the steps of creating a budget for startups so you can estimate costs correctly from the get-go and stay in the black from the first day.

    Plan for the First Day of Your Business

    Start by determining what you’ll need to open your doors and welcome customers. Some things to consider include in your startup budget are:

    • Costs of Facilities – This includes the cost of setting up your physical office location or warehouse. Are you buying a building or leasing a location? Is your business strictly e-commerce and physical facilities not needed?
    • Fixed Assets/Capital Expenditures – This includes costs for furniture, vehicles, and/or equipment needed to start the business. Machinery and computers fall into this category.
    • Materials & Supplies – Think office supplies, shipping supplies, and marketing materials.
    • Other Costs- Licenses, permits, insurance, and legal fees all fall into this catch-all category. Be sure to research free or low-cost business tools to help you get ahead of the competition

    Estimate Monthly Expenses

    Monthly expenses are either fixed, meaning they don’t change from month to month, or are dependent on the number of clients you have. Rent, office supplies, website service fees, and insurance are prime examples. Variable expenses change depending on incoming orders. These can include raw materials, sales commissions, and the cost of production. Individuals with a service-focused business can count on fewer variable expenses.

    Estimate Monthly Sales

    This is the most difficult part of a startup budget since you don’t know your new company’s sales history. We advise individuals to make three different projections:

    • Best Case Scenario
    • Worst Case Scenario
    • Likely Scenario

    Individuals should assume they won’t earn all sales the first try or even within the first year. Your business type and the way customers pay affect its sales and when the revenue is recognized. One should include a collection percentage along with their sales estimate every month. For example, if your sales estimate is $50,000 with a collection percentage of 80%, your cash for the month will be $40,000.

    Design a Cash Flow Statement

    Cash flow is the money that goes in and out of your business every month. One should manage their cash flow to keep their new business afloat. Start this statement by combining total costs and total income every month. Your monthly cash flow statement should include income from monthly sales, collection percentages, total fixed costs, total variable costs, and total cash balances.

    Final Thoughts

    To conclude, creating a startup budget is a bit complicated. However, the task is not impossible. Be sure to research your business type and have a solid understanding of what’s needed to open your doors and keep the business operational. Merchant financing might also be a solid way to receive an influx of cash into your business. A major hurdle for some high-risk businesses is obtaining a way to accept electronic payments from customers. Since 2010, Payment Savvy has cultivated strong relationships to quickly and easily get startup businesses up and running with an advanced payment platform. Please sure to connect with our knowledgeable team to learn how we can help your startup business dreams come true!

    Chad is a serial entrepreneur and founded Payment Savvy in 2011 armed with the goal of providing high-risk establishments with a pioneering and tailored payment processing solution that allows them to flourish. Having decades of knowledge in the financial services and debt recovery industries, he ensures every client receives the same level of expertise, resourcefulness, and strategic vision no matter the size of the organization. Always willing to push the envelope, Chad’s forward-thinking and leadership skills are responsible for Payment Savvy being on the map as an industry-leading payment processor.

    RECENT POSTS:

    high-risk merchant accounts

    High-Risk Business with Stripe, PayPal, Square, Venmo

    By Chad Deatherage | May 17, 2023

    Certain activities, or the industry you work in, may cause payment processors to characterize your merchant account as high risk. It isn’t uncommon for some businesses to process online payments and get higher-than-average returns, but your reputation and industry play an important role. Having your merchant account suspended will undoubtedly lead to revenue loss and…

    Automated Clearing House acronym with marker

    Instant ACH Transfers Online

    By Chad Deatherage | May 16, 2023

    Our current era has been shaped by digitization with a fundamental impact on all sectors, including banking and finance, where it has brought unprecedented convenience, security, and efficiency. The backbone of these developments is none other than America’s Automated Clearing House (ACH) which facilitates seamless electronic transactions between banks and financial institutions within its network.…

    FedNow instant payments service

    A Comprehensive Guide to FedNow

    By Chad Deatherage | May 15, 2023

    The Federal Reserve Bank is currently developing a new instant payment service called “FedNow” that will allow financial institutions to make instant payments. The FedNow Service will begin operating in July 2023 and it is the first U.S. government-created and -backed portal that will enable financial institutions to send and receive payments in real-time 24…